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Global Sourcing

  • Pol Antras
  • Elhanan Helpman

We present a Northâ€South model of international trade in which differentiated products are developed in the North. Sectors are populated by finalâ€good producers who differ in productivity levels. On the basis of productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Finalâ€good producers and their suppliers must make relationshipâ€specific investments, both in an integrated firm and in an arm’sâ€length relationship. We describe an equilibrium in which firms with different productivity levels choose different ownership structures and supplier locations. We then study the effects of withinâ€sectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 112 (2004)
Issue (Month): 3 (June)
Pages: 552-580

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Handle: RePEc:ucp:jpolec:v:112:y:2004:i:3:p:552-580
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  1. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  2. Antras, Pol, 2003. "Firms, Contracts, and Trade Structure," Scholarly Articles 3196328, Harvard University Department of Economics.
  3. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  4. Grossman, G.M. & Helpman, E., 2001. "Integration vs. Outsourcing in Industry Equilibrium," Papers 2001-7, Tel Aviv.
  5. Gene M. Grossman & Elhanan Helpman, 2002. "Managerial Incentives and the International Organization of Production," Harvard Institute of Economic Research Working Papers 1987, Harvard - Institute of Economic Research.
  6. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
  7. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  8. Marin, Dalia & Verdier, Thierry, 2012. "Globalization and the empowerment of talent," Journal of International Economics, Elsevier, vol. 86(2), pages 209-223.
  9. Lipsey, Robert E. & Blomström, Magnus & Ramstetter, Eric, 1995. "Internationalized Production in World Output," SSE/EFI Working Paper Series in Economics and Finance 80, Stockholm School of Economics.
  10. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
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  12. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  13. repec:oup:restud:v:66:y:1999:i:1:p:115-38 is not listed on IDEAS
  14. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," 2004 Meeting Papers 19, Society for Economic Dynamics.
  15. repec:oup:qjecon:v:118:y:2003:i:4:p:1375-1418 is not listed on IDEAS
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  17. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  18. Puga, Diego & Trefler, Daniel, 2002. "Knowledge Creation and Control in Organizations," CEPR Discussion Papers 3516, C.E.P.R. Discussion Papers.
  19. Katharine G. Abraham & Susan K. Taylor, 1993. "Firms' Use of Outside Contractors: Theory and Evidence," NBER Working Papers 4468, National Bureau of Economic Research, Inc.
  20. repec:rus:hseeco:122439 is not listed on IDEAS
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