IDEAS home Printed from
   My bibliography  Save this paper

Fragmentation, Outsourcing and the Service Sector


  • Ngo Van Long
  • Ray Riezman
  • Antoine Soubeyran


We show that the growth of the service sector facilitates outsourcing, or fragmentation of production. Services link production blocks, and allows the breaking up of integrated production. The cost of aggregate service decreases as the number of specialized services increases. A country with a greater number of specialized services tends to export components that are service-intensive. When international trade in specialized services are permitted, the country with an advanced service sector will outsource most of the manufacturing activities. Thus free trade in specialized services tends to increase fragmentation. On the other hand, if there are high transport costs with a bias against complex specialized services, then free trade in specialized services may work against fragmentation. On montre que la croissance du secteur des services facilite la fragmentation de la production. Les services relient les blocs de production et permettent la dispersion de la production intégrée. Un pays possédant un grand nombre de services spécialisés a tendance à exporter les pièces dont la production utilise intensément les services. Avec la libéralisation de l'échange des services, les pays possédant un secteur de services avancé tendent à impartir la fabrication des pièces. Par conséquent, la libéralisation du commerce augmente la fragmentation. Par contre, si les coûts de transport sont élevés pour les services les plus complexes, le libre échange des services spécialisés peut réduire la fragmentation.

Suggested Citation

  • Ngo Van Long & Ray Riezman & Antoine Soubeyran, 2001. "Fragmentation, Outsourcing and the Service Sector," CIRANO Working Papers 2001s-43, CIRANO.
  • Handle: RePEc:cir:cirwor:2001s-43

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Deardorff, Alan V, 2001. "International Provision of Trade Services, Trade, and Fragmentation," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 233-248, May.
    2. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
    3. Richard G. Harris, 1995. "Trade and Communication Costs," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 46-75, November.
    4. Deardorff, Alan V., 2001. "Fragmentation in simple trade models," The North American Journal of Economics and Finance, Elsevier, vol. 12(2), pages 121-137, July.
    5. Hanson, Gordon H, 1996. "Localization Economies, Vertical Organization, and Trade," American Economic Review, American Economic Association, vol. 86(5), pages 1266-1278, December.
    6. Horst Raff & Marc von der Ruhr, 2007. "Foreign Direct Investment in Producer Services: Theory and Empirical Evidence," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(3), pages 299-321.
    7. Richard G. Harris, 1993. "Globalization, Trade, and Income," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 755-776, November.
    8. repec:fth:michin:422 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Long, Ngo Van, 2005. "Outsourcing and technology spillovers," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 297-304.
    2. Gross, Dominique M. & Raff, Horst & Ryan, Michael, 2005. "Inter- and intra-sectoral linkages in foreign direct investment: evidence from Japanese investment in Europe," Journal of the Japanese and International Economies, Elsevier, vol. 19(1), pages 110-134, March.
    3. Kong Weng Ho & Hian Teck Hoon, 2003. "Service Links and Wage Inequality," Departmental Working Papers wp0301, National University of Singapore, Department of Economics.
    4. Nicholas Sim, 2004. "International production sharing and economic development: moving up the value-chain for a small-open economy," Applied Economics Letters, Taylor & Francis Journals, vol. 11(14), pages 885-889.

    More about this item


    Fragmentation; outsourcing; service sector; Fragmentation; impartition; secteur des services;

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:2001s-43. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.