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Spiders and snakes: offshoring and agglomeration in the global economy

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  • Richard Baldwin
  • Anthony Venables

Abstract

Global production sharing is determined by international cost differences and frictions related to the costs of unbundling stages spatially. The interaction between these forces depends on engineering details of the production process with two extremes being ‘snakes’ and ‘spiders’. Snakes are processes whose sequencing is dictated by engineering; spiders involve the assembly of parts in no particular order. This paper studies spatial unbundling as frictions fall, showing that outcomes are very different for snakes and spiders, even if they share some features. Both snakes and spiders have in common a property that lower frictions produce discontinuous location changes and ‘overshooting’. Parts may move against their comparative costs because of proximity benefits, and further reductions in frictions lead these parts to be ‘reshored’. Predictions for trade volumes and the number of fragmented stages are quite different in the two cases. For spiders, a part crosses borders at most twice; the value of trade increases monotonically as frictions fall, except when the assembler relocates and the direction of parts trade is reversed. For snakes the volume of trade and number of endogenously determined stages is bounded only by the fragmentation of the underlying engineering process, and lower frictions monotonically increase trade volumes.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16611.

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Date of creation: Dec 2010
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Publication status: published as Baldwin, Richard & Venables, Anthony J., 2013. "Spiders and snakes: Offshoring and agglomeration in the global economy," Journal of International Economics, Elsevier, vol. 90(2), pages 245-254.
Handle: RePEc:nbr:nberwo:16611

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Cited by:
  1. Roberto Antonietti & Maria Rosaria Ferrante & Riccardo Leoncini, 2014. "Trust your neighbour. Industrial relatedness, social capital and outsourcing," Papers in Evolutionary Economic Geography (PEEG) 1403, Utrecht University, Section of Economic Geography, revised Jan 2014.
  2. Pol Antras & Davin Chor, 2012. "Organizing the Global Value Chain," Working Papers 25-2012, Singapore Management University, School of Economics.
  3. Arnaud Costinot & Jonathan Vogel & Su Wang, 2013. "An Elementary Theory of Global Supply Chains," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 109-144.
  4. Frigant, Vincent & Zumpe, Martin, 2014. "Are automotive global production networks becoming more global? Comparison of regional and global integration processes based on auto parts trade data," MPRA Paper 55727, University Library of Munich, Germany.
  5. Nowak, Verena & Schwarz, Christian & Suedekum, Jens, 2014. "Asymmetric spiders: Supplier heterogeneity and the organization of firms," DICE Discussion Papers 141, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  6. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
  7. Schwarz, Christian & Suedekum, Jens, 2014. "Global sourcing of complex production processes," Journal of International Economics, Elsevier, vol. 93(1), pages 123-139.
  8. Teresa C. Fort, 2013. "Breaking Up Is Hard To Do: Why Firms Fragment Production Across Locations," Working Papers 13-35, Center for Economic Studies, U.S. Census Bureau.

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