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Production Clustering and Offshoring

Author

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  • Vladimir Tyazhelnikov

Abstract

I introduce a model of international production that allows the production chain to be of any length or number of sourcing countries and in which the production process does not have to be perfectly sequential. The presence of trade costs in this model makes firms cluster their production geographically, while trade liberalization allows firms to fragment their production more. Clustering patterns depend on the characteristics of the production structure, with stronger clustering associated with longer and less connected structures. Clustering intensity in upstream stages of production is generally higher and less affected by exogenous changes in production structure.

Suggested Citation

  • Vladimir Tyazhelnikov, 2022. "Production Clustering and Offshoring," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 700-732, August.
    • Handle: RePEc:aea:aejmic:v:14:y:2022:i:3:p:700-732
    DOI: 10.1257/mic.20190232
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    Cited by:

    1. Thomas J. Sargent & John Stachurski, 2024. "Dynamic Programming: Finite States," Papers 2401.10473, arXiv.org.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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