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Offshoring along the Production Chain

Author

Listed:
  • Philipp Harms
  • Oliver Lorz
  • Dieter M. Urban

Abstract

Recent contributions on offshoring often assume that firms can freely split their production process into separate steps which can be ranked according to the cost savings from producing abroad. We replace this assumption by the notion of a technologically determined sequence of production steps. In our model, cost savings from offshoring fluctuate along the production chain, and moving unfinished goods across borders causes transport costs. We show that, in such a setting, firms may refrain from offshoring even if relocating individual steps would be advantageous. Conversely, small variations in model parameters may lead to a large increase in offshoring activities.

Suggested Citation

  • Philipp Harms & Oliver Lorz & Dieter M. Urban, 2009. "Offshoring along the Production Chain," CESifo Working Paper Series 2564, CESifo.
    • Handle: RePEc:ces:ceswps:_2564
    as

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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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