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Bailing outsourcing

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  • Ng, Travis

Abstract

In a model of organizational choice, this paper shows that in face of an increasingly expected bailout from the government, outsourcing input production to an offshore location is more likely an optimal choice for a firm. Such a response is consistent with the three trends in the US manufacturing sector after the crisis: (a) employment keeps declining; (b) massive layoffs have not stopped; and (c) imported intermediate inputs have been gaining importance.

Suggested Citation

  • Ng, Travis, 2014. "Bailing outsourcing," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 983-993.
  • Handle: RePEc:eee:jcecon:v:42:y:2014:i:4:p:983-993
    DOI: 10.1016/j.jce.2014.01.002
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    References listed on IDEAS

    as
    1. Lammertjan Dam & Michael Koetter, 2012. "Bank Bailouts and Moral Hazard: Evidence from Germany," Review of Financial Studies, Society for Financial Studies, vol. 25(8), pages 2343-2380.
    2. Goldfeld, Stephen M. & Quandt, Richard E., 1988. "Budget constraints, bailouts, and the firm under central planning," Journal of Comparative Economics, Elsevier, vol. 12(4), pages 502-520, December.
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    4. Panageas, Stavros, 2010. "Bailouts, the incentive to manage risk, and financial crises," Journal of Financial Economics, Elsevier, vol. 95(3), pages 296-311, March.
    5. Pol Antràs & Robert W. Staiger, 2012. "Offshoring and the Role of Trade Agreements," American Economic Review, American Economic Association, vol. 102(7), pages 3140-3183, December.
    6. Economides, Nicholas, 1999. "Quality choice and vertical integration," International Journal of Industrial Organization, Elsevier, vol. 17(6), pages 903-914, August.
    7. Du, Julan & Li, David D., 2007. "The soft budget constraint of banks," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 108-135, March.
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    9. Feenstra, Robert C. & Jensen, J. Bradford, 2012. "Evaluating estimates of materials offshoring from US manufacturing," Economics Letters, Elsevier, vol. 117(1), pages 170-173.
    10. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211-211.
    11. Yi Lu & Travis Ng & Zhigang Tao, 2012. "Outsourcing, Product Quality, and Contract Enforcement," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(1), pages 1-30, March.
    12. Shuaizhang Feng & Yingyao Hu, 2013. "Misclassification Errors and the Underestimation of the US Unemployment Rate," American Economic Review, American Economic Association, vol. 103(2), pages 1054-1070, April.
    13. Susan Houseman & Christopher Kurz & Paul Lengermann & Benjamin Mandel, 2011. "Offshoring Bias in U.S. Manufacturing," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 111-132, Spring.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Offshoring; Outsourcing; Bailouts;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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