This note explores the value of search capital in interfirm matches in the outsourcing trade, by extending Rauch and Casella's (2003) framework to a dynamic model of matching and searching. On provisional calculations, the sunken cost of this search imposes a similar order of magnitude trade barrier to most tariffs, and would be expected to affect both the intensive and extensive margins of trade.
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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number
2009_08.
Find related papers by JEL classification: F00 - International Economics - - General - - - General F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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