International trade, flexible manufacturing, and outsourcing
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.
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Volume (Year): 42 (2009)
Issue (Month): 4 (November)
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References listed on IDEAS
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- John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
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