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A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe

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Author Info
Dalia Marin (Department of Economics, Ludwigstrasse 28, D-80539 Munich, phone: ++4989/2180-2446, fax: ++4989/2180-6227. dalia.marin@lrz.uni-muenchen.de)

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Abstract

Europe is reorganizing its international value chain. I document these changes in Europe’s international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intrafirm trade between Austria or Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labor in Europe. I find among other things that falling trade costs and reduced levels of corruption as well as improvements in the contracting environment in Eastern Europe are affecting the level of intrafirm imports from that region. These factors also favor outsourcing over offshoring. In contrast, low organizational costs of hierarchies and large costs of holdup (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) favor offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 80.

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Date of creation: Sep 2005
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Handle: RePEc:trf:wpaper:80

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Related research
Keywords: the empirics of global sourcing; intrafirm trade; contract enforcement; comparative advantage in Eastern Europe; empirical test of the theory of the firm;

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Marin, Dalia & Verdier, Thierry, 2003. "Globalization and the Empowerment of Talent," CEPR Discussion Papers 4129, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Marin, Dalia & Schnitzer, Monika, 1995. "Tying Trade Flows: A Theory of Countertrade with Evidence," American Economic Review, American Economic Association, vol. 85(5), pages 1047-64, December. [Downloadable!] (restricted)
  4. Dalia Marin & Monika Schnitzer, 2002. "Contracts in Trade and Transition: The Resurgence of Barter," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262133997.
  5. Marin, Dalia & Lorentowicz, Andzelika & Raubold, Alexander, 2002. "Ownership, Capital or Outsourcing: What Drives German Investment to Eastern Europe?," Discussion Papers in Economics 72, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  6. Nathan Nunn, 2005. "Relationship Specificity, Incomplete Contracts and the Pattern of Trade," International Trade 0512018, EconWPA. [Downloadable!]
    Other versions:
  7. Marin, Dalia, 2004. "'A Nation of Poets and Thinkers' - Less So with Eastern Enlargement? Austria and Germany," Discussion Papers in Economics 329, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  8. Andzelika Lorentowicz & Dalia Marin & Alexander Raubold, 2005. "Is Human Capital Losing From Outsourcing? Evidence for Austria and Poland," Discussion Papers 76, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  9. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2005. "Contracts and the Division of Labor," NBER Working Papers 11356, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June. [Downloadable!] (restricted)
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  11. Marin, Dalia & Verdier, Thierry, 2006. "Corporate Hierarchies and the Size of Nations: Theory and Evidence," Discussion Papers in Economics 1346, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  12. Gordon H. Hanson & Raymond J. Mataloni, Jr. & Matthew J. Slaughter, 2001. "Expansion Strategies of U.S. Multinational Firms," NBER Working Papers 8433, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andzelika Lorentowicz & Dalia Marin & Alexander Raubold, 2005. "Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Otmar Issing, 2006. "Europe’s Hard Fix: The Euro Area," Working Papers 120, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
  3. Marin, Dalia & Verdier, Thierry, 2007. "Competing in Organizations: Firm Heterogeneity and International Trade," Discussion Papers in Economics 1933, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  4. Dalia Marin & Thierry Verdier, 2009. "Power in the multinational corporation in industry equilibrium," Economic Theory, Springer, vol. 38(3), pages 437-464, March. [Downloadable!] (restricted)
    Other versions:
  5. Noriyuki Yanagawa, 2008. "Financial Imperfection and Outsourcing Decision," CIRJE F-Series CIRJE-F-586, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  6. Mugele, Christian & Schnitzer, Monika, 2006. "Organization of Multinational Activities and Ownership Structure," CEPR Discussion Papers 5592, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. Ghibutiu, Agnes & Poladian, Simona, 2009. "Global Sourcing Of Services: How Well Are The New Eu Member States Coping With The Challenges? (Part I)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(1), pages 123-135, March. [Downloadable!]
  8. Marc-Andreas Muendler & Sascha Becker, 2006. "Margins of Multinational Labor Substitution," University of California at San Diego, Economics Working Paper Series 2006-04R, Department of Economics, UC San Diego. [Downloadable!]
    Other versions:
  9. Michael Hübler, 2007. "A Simple Model of Outsourcing with Cournot Competition," Kiel Working Papers 1320, Kiel Institute for the World Economy. [Downloadable!]
  10. Otmar Issing, 2006. "Europe's Hard Fix: The Euro Area," Working Papers 39, Bank of Greece. [Downloadable!]
  11. Marin, Dalia & Verdier, Thierry, 2006. "Corporate Hierarchies and the Size of Nations: Theory and Evidence," Discussion Papers in Economics 1346, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  12. Ariel Burstein & Christopher Kurz & Linda Tesar, 2008. "Trade, Production Sharing, and the International Transmission of Business Cycles," NBER Working Papers 13731, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Böckerman, Petri & Riihimäki, Elisa, 2009. "International outsourcing and labour demand: Evidence from Finnish firm-level data," MPRA Paper 16903, University Library of Munich, Germany. [Downloadable!]
  14. repec:bep:eapadv:v:8:y:2008:i:1:p:1770-1770 is not listed on IDEAS
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