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Outsourcing in a Global Economy?

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  • Gene M. Grossman
  • Elhanan Helpman

Abstract

We study the determinants of the location of sub-contracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs, and the nature of the contracting environment in each country.

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File URL: http://www.economics.harvard.edu/pub/hier/2002/HIER1966.pdf
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Bibliographic Info

Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1966.

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Date of creation: 2002
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Handle: RePEc:fth:harver:1966

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  1. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  2. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  3. McLaren, J., 1996. "'Globalization' and Vertical Structure," Discussion Papers 1996_21, Columbia University, Department of Economics.
  4. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
  5. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
  6. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics.
  7. James E. Rauch & Vitor Trindade, 2000. "Information and Globalization: Wage Co-Movements, Labor Demand Elasticity, and Conventional Trade Liberalization," NBER Working Papers 7671, National Bureau of Economic Research, Inc.
  8. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
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