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Global Sourcing

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  • Antras, Pol
  • Helpman, Elhanan

Abstract

We present a Northâ€South model of international trade in which differentiated products are developed in the North. Sectors are populated by finalâ€good producers who differ in productivity levels. On the basis of productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Finalâ€good producers and their suppliers must make relationshipâ€specific investments, both in an integrated firm and in an arm’sâ€length relationship. We describe an equilibrium in which firms with different productivity levels choose different ownership structures and supplier locations. We then study the effects of withinâ€sectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms.

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Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3196327.

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Date of creation: 2004
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Publication status: Published in Journal of Political Economy
Handle: RePEc:hrv:faseco:3196327

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  1. Diego Puga & Daniel Trefler, 2002. "Knowledge creation and control in organizations," Working Papers dpuga-02-01, University of Toronto, Department of Economics.
  2. 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.
  3. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  4. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," NBER Working Papers 6726, National Bureau of Economic Research, Inc.
  5. Marin, Dalia & Verdier, Thierry, 2003. "Globalization and the Empowerment of Talent," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4129, C.E.P.R. Discussion Papers.
  6. Gene Grossman & Elhanan Helpman, 2001. "Integration vs. Outsourcing in Industry Equilibrium," CESifo Working Paper Series 460, CESifo Group Munich.
  7. Grossman, Gene & Helpman, Elhanan, 2003. "Managerial Incentives and the International Organization of Production," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3737, C.E.P.R. Discussion Papers.
  8. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, Econometric Society, vol. 71(6), pages 1695-1725, November.
  9. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(4), pages 31-50, Fall.
  10. repec:rus:hseeco:122439 is not listed on IDEAS
  11. Katharine G. Abraham & Susan K. Taylor, 1993. "Firms' Use of Outside Contractors: Theory and Evidence," NBER Working Papers 4468, National Bureau of Economic Research, Inc.
  12. Robert E. Lipsey & Magnus Blomstrom & Eric Ramstetter, 1995. "Internationalized Production in World Output," NBER Working Papers 5385, National Bureau of Economic Research, Inc.
  13. Pol Antràs, 2003. "Incomplete Contracts and the Product Cycle," NBER Working Papers 9945, National Bureau of Economic Research, Inc.
  14. Pol Antràs, 2003. "Firms, Contracts, And Trade Structure," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(4), pages 1375-1418, November.
  15. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 972-91, September.
  16. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 300-316, March.
  17. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
  18. Segal, Ilya, 1999. "Complexity and Renegotiation: A Foundation for Incomplete Contracts," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(1), pages 57-82, January.
  19. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports, Federal Reserve Bank of New York 72, Federal Reserve Bank of New York.
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