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International Trade, Flexible Manufacturing and Outsourcing

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  • Eckel, Carsten

Abstract

This study analyzes the impact of international trade on the diffusion of flexible manufacturing in a general equilibrium framework. Suppliers produce a flexible base product that can be adapted to the specific input requirements of a continuum of downstream industries. The vertical structure is determined by the trade-off between economies of scope in flexible manufacturing and product specificity of in-house production. In this framework, globalization can lead to alternating waves of insourcing and outsourcing, but once the world market reaches a threshold size, outsourcing prevails. We also derive a number of testable predictions with regard to firm size and productivity measures that are in line with recent empirical and casual evidence. --

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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 45.

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Date of creation: 2005
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Handle: RePEc:zbw:cegedp:45

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Web page: http://www.cege.wiso.uni-goettingen.de/
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Related research

Keywords: International Trade; Flexible Manufacturing; Outsourcing; Vertical Integration; Globalization; General Equilibrium;

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References

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  1. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  2. Tybout, James R. & Westbrook, M. Daniel, 1995. "Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries," Journal of International Economics, Elsevier, vol. 39(1-2), pages 53-78, August.
  3. McLaren, J., 1996. "'Globalization' and Vertical Structure," Discussion Papers 1996_21, Columbia University, Department of Economics.
  4. Curtis Eaton, B. & Schmitt, N., 1991. "Flexible Manufacturing and Market Structure," Papers 1991-02, Tasmania - Department of Economics.
  5. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  6. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  7. Ethier, Wilfred, 1979. "Internationally decreasing costs and world trade," Journal of International Economics, Elsevier, vol. 9(1), pages 1-24, February.
  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  9. Donald Gerwin, 1993. "Manufacturing Flexibility: A Strategic Perspective," Management Science, INFORMS, vol. 39(4), pages 395-410, April.
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Cited by:
  1. Eckel, Carsten & Neary, J Peter, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," CEPR Discussion Papers 5941, C.E.P.R. Discussion Papers.
  2. Inga Heiland & Wilhelm Kohler, 2013. "Heterogeneous Workers, Trade, and Migration," CESifo Working Paper Series 4387, CESifo Group Munich.
  3. Luigi Pascali, 2009. "Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis," Boston College Working Papers in Economics 727, Boston College Department of Economics.

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