IDEAS home Printed from https://ideas.repec.org/a/eee/inecon/v101y2016icp22-41.html
   My bibliography  Save this article

Offshoring with endogenous NGO activism

Author

Listed:
  • Krautheim, Sebastian
  • Verdier, Thierry

Abstract

The process of globalization is characterized by an impressive growth of global value chains, as well as the proliferation of non-governmental organizations (NGOs) interacting with multinational firms. This paper presents a model of offshoring and NGO–firm interactions in which offshoring to a low-regulation country allows a monopolist to implement a “dirty” technology undesired by consumers. Consumers can reduce the incentive for dirty production by financing an NGO monitoring the firm. NGO emergence and offshoring can arise as joint and interacting outcomes. For a range of trade costs, NGO emergence allows firms to capture gains from globalization, which would otherwise be unattainable. Somewhat paradoxically, NGO emergence can be at the expense of consumers possibly leading to welfare losses through offshoring.

Suggested Citation

  • Krautheim, Sebastian & Verdier, Thierry, 2016. "Offshoring with endogenous NGO activism," Journal of International Economics, Elsevier, vol. 101(C), pages 22-41.
  • Handle: RePEc:eee:inecon:v:101:y:2016:i:c:p:22-41
    DOI: 10.1016/j.jinteco.2016.03.009
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022199616300447
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jinteco.2016.03.009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Aldashev, Gani & Limardi, Michela & Verdier, Thierry, 2015. "Watchdogs of the Invisible Hand: NGO monitoring and industry equilibrium," Journal of Development Economics, Elsevier, vol. 116(C), pages 28-42.
    2. Chau, Nancy H. & Huysentruyt, Marieke, 2006. "Nonprofits and public good provision: A contest based on compromises," European Economic Review, Elsevier, vol. 50(8), pages 1909-1935, November.
    3. Chisik, Richard, 2003. "Export industry policy and reputational comparative advantage," Journal of International Economics, Elsevier, vol. 59(2), pages 423-451, March.
    4. Mailath George J. & Okuno-Fujiwara Masahiro & Postlewaite Andrew, 1993. "Belief-Based Refinements in Signalling Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 241-276, August.
    5. Matthew J. Kotchen, 2006. "Green Markets and Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 816-845, August.
    6. Timothy J. Feddersen & Thomas W. Gilligan, 2001. "Saints and Markets: Activists and the Supply of Credence Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 149-171, March.
    7. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    8. Raff, Horst & Kim, Young-Han, 1999. "Optimal export policy in the presence of informational barriers to entry and imperfect competition," Journal of International Economics, Elsevier, vol. 49(1), pages 99-123, October.
    9. Aldashev, Gani & Verdier, Thierry, 2009. "When NGOs go global: Competition on international markets for development donations," Journal of International Economics, Elsevier, vol. 79(2), pages 198-210, November.
    10. Robert Innes, 2006. "A Theory of Consumer Boycotts under Symmetric Information and Imperfect Competition," Economic Journal, Royal Economic Society, vol. 116(511), pages 355-381, April.
    11. Rowat, Colin & Seabright, Paul, 2006. "Intermediation by aid agencies," Journal of Development Economics, Elsevier, vol. 79(2), pages 469-491, April.
    12. Besley, Timothy & Ghatak, Maitreesh, 2007. "Retailing public goods: The economics of corporate social responsibility," Journal of Public Economics, Elsevier, vol. 91(9), pages 1645-1663, September.
    13. Markus Kitzmueller & Jay Shimshack, 2012. "Economic Perspectives on Corporate Social Responsibility," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 51-84, March.
    14. Bagwell, Kyle & Staiger, Robert W., 1989. "The role of export subsidies when product quality is unknown," Journal of International Economics, Elsevier, vol. 27(1-2), pages 69-89, August.
    15. Patrick Francois, 2003. "Not-For-Profit Provision of Public Services," Economic Journal, Royal Economic Society, vol. 113(486), pages 53-61, March.
    16. Bagwell, Kyle, 1991. "Optimal Export Policy for a New-Product Monopoly," American Economic Review, American Economic Association, vol. 81(5), pages 1156-1169, December.
    17. Besley, Timothy & Ghatak, Maitreesh, 2017. "Public–private partnerships for the provision of public goods: Theory and an application to NGOs," Research in Economics, Elsevier, vol. 71(2), pages 356-371.
    18. Cagé, Julia & Rouzet, Dorothée, 2015. "Improving “national brands”: Reputation for quality and export promotion strategies," Journal of International Economics, Elsevier, vol. 95(2), pages 274-290.
    19. Jeitschko, Thomas D. & Normann, Hans-Theo, 2012. "Signaling in deterministic and stochastic settings," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 39-55.
    20. Pol Antras & Elhanan Helpman, 2004. "Global Sourcing," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 552-580, June.
    21. Mark Bagnoli & Susan G. Watts, 2003. "Selling to Socially Responsible Consumers: Competition and The Private Provision of Public Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 419-445, September.
    22. Atkinson, A.B., 2009. "Giving overseas and public policy," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 647-653, June.
    23. PESTIEAU, Pierre & SATO, Motohiro, 2006. "Limiting the number of charities," LIDAM Discussion Papers CORE 2006074, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    24. Loureiro, Maria L. & Lotade, Justus, 2005. "Do fair trade and eco-labels in coffee wake up the consumer conscience?," Ecological Economics, Elsevier, vol. 53(1), pages 129-138, April.
    25. David P. Baron & Daniel Diermeier, 2007. "Strategic Activism and Nonmarket Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 599-634, September.
    26. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    27. David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, March.
    28. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
    29. Aldashev, Gani & Verdier, Thierry, 2010. "Goodwill bazaar: NGO competition and giving to development," Journal of Development Economics, Elsevier, vol. 91(1), pages 48-63, January.
    30. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    31. David P. Baron, 2009. "A Positive Theory of Moral Management, Social Pressure, and Corporate Social Performance," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 7-43, March.
    32. Immordino Giovanni, 2008. "Fairness, Consumer Consciousness and the Welfare of Less Developed Countries," Global Economy Journal, De Gruyter, vol. 8(1), pages 1-21, February.
    33. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    34. Baron, David P., 2012. "The Industrial Organization of Private Politics," Quarterly Journal of Political Science, now publishers, vol. 7(2), pages 135-174, April.
    35. Jeremy Thornton, 2008. "Competition, Contractibility, and the Market for Donors to Nonprofits," Journal of Law, Economics, and Organization, Oxford University Press, vol. 24(1), pages 215-246, May.
    36. repec:dau:papers:123456789/5134 is not listed on IDEAS
    37. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    38. Ann Harrison & Jason Scorse, 2010. "Multinationals and Anti-sweatshop Activism," American Economic Review, American Economic Association, vol. 100(1), pages 247-273, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pamina Koenig & Sandra Poncet, 2019. "Reputation and (un)fair trade: Effects on French importers from the Rana Plaza collapse," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02350112, HAL.
    2. Sophie Hatte & Pamina Koenig, 2020. "The Geography of NGO Activism against Multinational Corporations," World Bank Economic Review, World Bank Group, vol. 34(1), pages 143-163.
    3. Pamina Koenig, 2017. "Notes on Sigwatch's NGO campaign database," PSE Working Papers halshs-01671758, HAL.
    4. Koenig, Pamina & Poncet, Sandra, 2019. "Social responsibility scandals and trade," World Development, Elsevier, vol. 124(C), pages 1-1.
    5. Pamina Koenig & Sandra Poncet, 2018. "Activism and Trade," Working Papers halshs-01959943, HAL.
    6. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2018. "Technology diffusion, international integration and participation in developing economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 15(1), pages 215-253, January.
    7. Pamina Koenig & Sandra Poncet, 2019. "Reputation and (un)fair trade: Effects on French importers from the Rana Plaza collapse," Post-Print halshs-02350112, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Krautheim, Sebastian & Verdier, Thierry, 2012. "Globalization, Credence Goods and International Civil Society," CEPR Discussion Papers 9232, C.E.P.R. Discussion Papers.
    2. Markus Kitzmueller & Jay Shimshack, 2012. "Economic Perspectives on Corporate Social Responsibility," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 51-84, March.
    3. Sophie Hatte & Pamina Koenig, 2020. "The Geography of NGO Activism against Multinational Corporations," World Bank Economic Review, World Bank Group, vol. 34(1), pages 143-163.
    4. Aldashev, Gani & Limardi, Michela & Verdier, Thierry, 2015. "Watchdogs of the Invisible Hand: NGO monitoring and industry equilibrium," Journal of Development Economics, Elsevier, vol. 116(C), pages 28-42.
    5. Yue Wu & Kaifu Zhang & Jinhong Xie, 2020. "Bad Greenwashing, Good Greenwashing: Corporate Social Responsibility and Information Transparency," Management Science, INFORMS, vol. 66(7), pages 3095-3112, July.
    6. Gani Aldashev & Michela Limardi & Thierry Verdier, 2013. "Watchdogs of the Invisible Hand: NGO Monitoring, Corporate Social Responsibility, and Industry Equilibrium," Working Papers 1404, University of Namur, Department of Economics.
    7. Witold J. Henisz & Sinziana Dorobantu & Lite J. Nartey, 2014. "Spinning gold: The financial returns to stakeholder engagement," Strategic Management Journal, Wiley Blackwell, vol. 35(12), pages 1727-1748, December.
    8. Vasileiou, Efi & Georgantzís, Nikolaos, 2015. "An experiment on energy-saving competition with socially responsible consumers: Opening the black box," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 1-10.
    9. Baron, David P., 2011. "Credence attributes, voluntary organizations, and social pressure," Journal of Public Economics, Elsevier, vol. 95(11), pages 1331-1338.
    10. David P. Baron, 2009. "A Positive Theory of Moral Management, Social Pressure, and Corporate Social Performance," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 7-43, March.
    11. Patricia Crifo & Vanina D. Forget, 2015. "The Economics Of Corporate Social Responsibility: A Firm-Level Perspective Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 112-130, February.
    12. Patricia Crifo & Vanina Forget, 2012. "The Economics of Corporate Social Responsibility: A Survey," Working Papers hal-00720640, HAL.
    13. Aseem Kaul & Jiao Luo, 2018. "An economic case for CSR: The comparative efficiency of for‐profit firms in meeting consumer demand for social goods," Strategic Management Journal, Wiley Blackwell, vol. 39(6), pages 1650-1677, June.
    14. Etilé, Fabrice & Teyssier, Sabrina, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 94(2).
    15. Paul Pecorino, 2013. "Monopolistic Competition and Public Good Provision with By‐product Firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 875-893, December.
    16. Georgy Egorov & Bård Harstad, 2017. "Private Politics and Public Regulation," Review of Economic Studies, Oxford University Press, vol. 84(4), pages 1652-1682.
    17. Steve Martin, 2019. "Moral management in competitive markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 541-560, June.
    18. Pecorino, Paul, 2010. "By-product lobbying with rival public goods," European Journal of Political Economy, Elsevier, vol. 26(1), pages 114-124, March.
    19. Patricia Crifo & Vanina Forget, 2013. "La responsabilité sociale et environnementale des entreprises : mirage ou virage ?," Working Papers hal-00830642, HAL.
    20. Couttenier, Mathieu & Hatte, Sophie, 2016. "Mass media effects on non-governmental organizations," Journal of Development Economics, Elsevier, vol. 123(C), pages 57-72.

    More about this item

    Keywords

    NGOs; Offshoring; Credence goods; Globalization;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:101:y:2016:i:c:p:22-41. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.