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International trade, flexible manufacturing, and outsourcing

Author

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  • Carsten Eckel

Abstract

This study analyzes the impact of opening up markets on the diffusion of flexible manufacturing in a general equilibrium framework. With flexible manufacturing, suppliers can service a range of downstream industries and do not have to be concerned about being held up. Instead, the vertical structure is determined by the trade-off between economies of scale in flexible manufacturing and product specificity of in-house production. The analysis derives a number of testable predictions with regard to firm size and productivity measures and shows that globalization can lead to a consolidation in upstream markets, lower real wages, and reduce welfare.

Suggested Citation

  • Carsten Eckel, 2009. "International trade, flexible manufacturing, and outsourcing," Canadian Journal of Economics, Canadian Economics Association, vol. 42(4), pages 1449-1472, November.
    • Handle: RePEc:cje:issued:v:42:y:2009:i:4:p:1449-1472
    DOI: 10.1111/j.1540-5982.2009.01552.x
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    Cited by:

    1. Inga Heiland, 2017. "Five Essays on International Trade, Factor Flows and the Gains from Globalization," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 74.
    2. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 188-217.
    3. Heiland, Inga & Kohler, Wilhelm, 2022. "Heterogeneous workers, trade, and migration," European Economic Review, Elsevier, vol. 144(C).
    4. Oliver Lorz & Matthias Wrede, 2008. "Standardization of intermediate goods and international trade," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 517-536, May.
    5. Luigi Pascali, 2009. "Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis," Boston College Working Papers in Economics 727, Boston College Department of Economics.
    6. Huanlang He & Zhihao Yu, 2015. "The evolving patterns of global production of multi-product firms," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 1175-1194, August.
    7. Carsten Eckel, 2009. "International trade, flexible manufacturing, and outsourcing," Canadian Journal of Economics, Canadian Economics Association, vol. 42(4), pages 1449-1472, November.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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