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Globalization and the Evolution of the Supply Chain: who gains and who loses?

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  • Fujita, Masahisa
  • Thisse, Jacques-Francois

Abstract

This paper focuses on two distinct facets of globalization: the decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities within firms. When the unskilled have about the same wage in the two regions, the decrease of these costs fosters the gradual agglomeration of plants in the core region accommodating the headquarters. By contrast, when the wage gap is significant, the process of integration eventually triggers the re-location of plants into the periphery. In particular, when the process of re-location is driven by falling communication costs, the welfare of all workers living in the core goes down whereas the welfare of those who reside in the periphery rises.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/204/3/ARRIDE_Discussion_No.5_fujita.pdf
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Bibliographic Info

Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 5.

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Date of creation: Aug 2004
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Publication status: Published in IDE Discussion Paper. No. 5. 2004.8
Handle: RePEc:jet:dpaper:dpaper5

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Related research

Keywords: Information technologies (technology); Communication costs; Agglomeration; Headquarters; Plants; Supply chain; Re-location; Globalization; International economic relations; Communication;

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References

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  1. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  2. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  4. repec:fth:iniesr:430 is not listed on IDEAS
  5. Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies, Palgrave Macmillan, vol. 32(4), pages 641-665, December.
  6. Fujita, Masahisa & Thisse, Jacques-Francois, 1996. "Economics of Agglomeration," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 339-378, December.
  7. Thomas, Douglas J. & Griffin, Paul M., 1996. "Coordinated supply chain management," European Journal of Operational Research, Elsevier, vol. 94(1), pages 1-15, October.
  8. repec:cup:cbooks:9780521801386 is not listed on IDEAS
  9. Gilles Duranton & Diego Puga, 2000. "Nursery Cities: Urban diversity, process innovation, and the life-cycle of products," Working Papers dpuga-00-01, University of Toronto, Department of Economics.
  10. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
  11. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  12. Deardorff, A.V., 1998. "Fragmentation in Simple Trade Models," Working Papers 422, Research Seminar in International Economics, University of Michigan.
  13. J Vernon Henderson & James Davis, 2004. "The Agglomeration of Headquarters," Working Papers 04-02, Center for Economic Studies, U.S. Census Bureau.
  14. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
  15. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers 3135, C.E.P.R. Discussion Papers.
  16. repec:cup:cbooks:9780521805247 is not listed on IDEAS
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