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Inshoring: The geographic fragmentation of production and inequality

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  • Liao, Wen-Chi

Abstract

The advent of information technology facilitates the geographic separation of production tasks, which is referred to as offshoring in international contexts and inshoring in domestic contexts. Although the literature on offshoring has flourished, the research regarding inshoring is limited. This paper examines inshoring on both empirical and theoretical fronts. Empirically, it shows that business support services have been increasingly sent to small localities for cost savings while being separated from their downstream industries, which have been consistently concentrated in large cities. Guided by empirical findings, a system of cities model is formulated to analyze inshoring and its welfare impact. The analysis shows that support workers are made better off, primarily because inshoring allows support workers to benefit from higher urban productivity without bearing urban costs.

Suggested Citation

  • Liao, Wen-Chi, 2012. "Inshoring: The geographic fragmentation of production and inequality," Journal of Urban Economics, Elsevier, vol. 72(1), pages 1-16.
  • Handle: RePEc:eee:juecon:v:72:y:2012:i:1:p:1-16
    DOI: 10.1016/j.jue.2012.01.001
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    Cited by:

    1. Duranton, Gilles & Puga, Diego, 2015. "Urban Land Use," Handbook of Regional and Urban Economics, Elsevier.

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    Keywords

    Inshoring; Geographic fragmentation of production; Vertical disintegration; Inequality; System of cities;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D6 - Microeconomics - - Welfare Economics
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L8 - Industrial Organization - - Industry Studies: Services
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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