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The Value of Information in International Trade: Gains to Outsourcing through Hong Kong

Author

Listed:
  • Feenstra Robert C

    () (University of California. Davis and National Bureau of Economic Research)

  • Hanson Gordon H.

    () (University of California, San Diego, and National Bureau of Economic Research)

  • Lin Songhua

    () (Denison University)

Abstract

In this paper, we estimate the benefits to countries that purchase goods from China by having access to intermediary services provided in Hong Kong. Traders in Hong Kong supply information on markets and producers in China, which provides welfare gains to foreign firms using these services. During the 1990s, Hong Kong intermediated about one-half of the goods that China exported to the rest of the world. Using constant elasticity demand curves, we find that the gains to intermediary services provided by Hong Kong are roughly equal to the value of these Hong Kong re-exports, and four to five times larger than the markups earned in Hong Kong. Using a linear approximation to the demand curves instead, we find that the gains are one-quarter as much as the value of re-exports, or slightly larger than the markups.

Suggested Citation

  • Feenstra Robert C & Hanson Gordon H. & Lin Songhua, 2004. "The Value of Information in International Trade: Gains to Outsourcing through Hong Kong," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-37, August.
  • Handle: RePEc:bpj:bejeap:v:advances.4:y:2004:i:1:n:7
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alyson C. Ma & Ari Van Assche & Chang Hong, 2010. "Global Production Networks and the People’s Republic of China’s Processing Trade," Working Papers id:3041, eSocialSciences.
    2. Ma, Alyson C. & Van Assche, Ari & Hong, Chang, 2009. "Global production networks and China's processing trade," Journal of Asian Economics, Elsevier, vol. 20(6), pages 640-654, November.
    3. Nordås, Hildegunn Kyvik, 2003. "Fragmented production: Regionalization of trade?," WTO Staff Working Papers ERSD-2003-01, World Trade Organization (WTO), Economic Research and Statistics Division.
    4. Lars Calmfors & Giancarlo Corsetti & John Kay & Seppo Honkapohja & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2005. "Chapter 2: Outsourcing," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 39-50, March.
    5. Guillaume Daudin, 2005. "Les transactions de la mondialisation," Revue de l'OFCE, Presses de Sciences-Po, vol. 92(1), pages 221-262.
    6. Bruce A. Blonigen & Alyson C. Ma, 2010. "Please Pass the Catch-Up: The Relative Performance of Chinese and Foreign Firms in Chinese Exports," NBER Chapters,in: China's Growing Role in World Trade, pages 475-509 National Bureau of Economic Research, Inc.
    7. Alessandro Nicita & Marcelo Olarreaga, 2007. "Information and Export Performance," Journal of Industry, Competition and Trade, Springer, vol. 7(2), pages 95-111, June.
    8. Patricia Sourdin & Richard Pomfret, 2012. "Trade Facilitation," Books, Edward Elgar Publishing, number 14596.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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