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The evolving patterns of global production of multi-product firms

Author

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  • Huanlang He
  • Zhihao Yu

Abstract

We extend the framework of Antràs and Helpman (2004) to investigate how multi-product firms choose different production structures for producing various products and derive four equilibrium patterns of global production. We show that the evolving patterns of inward foreign direct investment and outward processing trade observed in China can be explained by the rapid increase in labour productivity relative to wages. The model predicts that, as labour productivity increases, outsourcing activities will eventually exhibit an inverse U-shape. We also find that technology spillover increases outsourcing but reduces FDI; the increase in labour productivity, however, could raise both FDI and outsourcing activities.

Suggested Citation

  • 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.
    • Handle: RePEc:cje:issued:v:48:y:2015:i:3:p:1175-1194
    DOI: 10.1111/caje.12172
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    Cited by:

    1. Haiwen Zhou, 2023. "Impact of international trade under dual labor markets," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 917-934, October.
    2. Haiwen Zhou, 2022. "The Choice of Technology and Economic Geography," International Economic Journal, Taylor & Francis Journals, vol. 36(1), pages 1-18, January.
    3. He, Huanlang & Yu, Zhihao, 2018. "Product quality, incomplete contract and the product cycle," International Review of Economics & Finance, Elsevier, vol. 53(C), pages 160-167.
    4. Haiwen Zhou & Ruhai Zhou, 2023. "Shirking and capital accumulation under oligopolistic competition," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(2), pages 394-407, September.
    5. Christopher Colburn & Haiwen Zhou, 2022. "The partition of production between households and markets," International Studies of Economics, John Wiley & Sons, vol. 17(1), pages 21-35, June.
    6. Binglin Gong & Haiwen Zhou, 2023. "The choice of technology and international trade," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 32(7), pages 1035-1057, October.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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