Trade Liberalization and Strategic Outsourcing
This paper develops a model of strategic outsourcing. With trade liberalization in the intermediate-product market, a domestic firm may choose to purchase a key intermediate good from a more efficient foreign producer, who also competes with the domestic firm for a final good. This has a strategic effect on competition. Unlike the outsourcing motivated by cost saving, the strategic outsourcing has a collusive effect that could raise the prices of both intermediate and final goods. Trade liberalization in the intermediate-good market has a very different effect compared with trade liberalization in the final-good market.
|Date of creation:||01 Dec 2002|
|Date of revision:||Jul 2004|
|Publication status:||Published: Revised version in Journal of International Economics, Vol. 63, No. 2 (July 2004), pp. 419–436|
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