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

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Author Info

  • Masahisa Fujita

    (Institute of Economic Research, Kyoto University)

  • Jacques-Francois Thisse

    (CORE, Universite catholique de Louvain (Belgium), CERAS, Ecole nationale des ponts et chaussees (France) and CEPR.)

Abstract

This paper focuses on two distint 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 trigers the re-location of plants into the periphery. In particular, when the preocess 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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Bibliographic Info

Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 571.

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Length: 29 pages
Date of creation: May 2003
Date of revision:
Handle: RePEc:kyo:wpaper:571

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Related research

Keywords: information technologies; communication costs; agglomeration; headquarters; plants; supply chain; re-location;

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References

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  1. Gilles Duranton & Diego Puga, 2000. "Nursery Cities: Urban Diversity, Process Innovation and the Life-Cycle of Products," CEP Discussion Papers dp0445, Centre for Economic Performance, LSE.
  2. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 8(1), pages 71-79.
  3. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 9(2), pages 169-189, Spring.
  4. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(4), pages 857-80, November.
  5. J Vernon Henderson & James Davis, 2004. "The Agglomeration of Headquarters," Working Papers 04-02, Center for Economic Studies, U.S. Census Bureau.
  6. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers, University of California, Davis, Department of Economics 986, University of California, Davis, Department of Economics.
  8. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3135, C.E.P.R. Discussion Papers.
  9. Thomas, Douglas J. & Griffin, Paul M., 1996. "Coordinated supply chain management," European Journal of Operational Research, Elsevier, Elsevier, vol. 94(1), pages 1-15, October.
  10. Duranton, Gilles & Puga, Diego, 2003. "Microfoundations of Urban Agglomeration Economies," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4062, C.E.P.R. Discussion Papers.
  11. Edward E. Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," NBER Working Papers 8450, National Bureau of Economic Research, Inc.
  12. repec:cup:cbooks:9780521805247 is not listed on IDEAS
  13. Deardorff, A.V., 1998. "Fragmentation in Simple Trade Models," Papers, Michigan - Center for Research on Economic & Social Theory 98-11, Michigan - Center for Research on Economic & Social Theory.
  14. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 483-99, June.
  15. repec:cup:cbooks:9780521801386 is not listed on IDEAS
  16. repec:fth:iniesr:430 is not listed on IDEAS
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