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Globalisation and the evolution of the supply chain: who gains and who loses?

  • FUJITA, Masahisa
  • THISSE, Jacques-François

This paper focuses on two distinct facets of globalization: the decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities within firms. When the unskilled have about the same wage in the two regions, the decrease of these costs fosters the gradual agglomeration of plants in the core region accommodating the headquarters. By contrast, when the wage gap is significant, the process of integration eventually triggers the re-location of plants into the periphery. In particular, when the process of re-location is driven by falling communication costs, the welfare of all workers living in the core goes down whereas the welfare of those who reside in the periphery rises.

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File URL: http://dx.doi.org/10.1111/j.1468-2354.2006.00397.x
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1968.

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Handle: RePEc:cor:louvrp:-1968
Note: In : International Economic Review, 47(3), 811-836, 2006
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  1. Edward E. Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," NBER Working Papers 8450, National Bureau of Economic Research, Inc.
  2. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers 3135, C.E.P.R. Discussion Papers.
  3. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
  4. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  5. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
  6. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Duranton, Gilles & Puga, Diego, 2000. "Nursery Cities: Urban Diversity, Process Innovation, and the Life-Cycle of Products," CEPR Discussion Papers 2376, C.E.P.R. Discussion Papers.
  8. Thomas, Douglas J. & Griffin, Paul M., 1996. "Coordinated supply chain management," European Journal of Operational Research, Elsevier, vol. 94(1), pages 1-15, October.
  9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  10. 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.
  11. Davis, James C. & Henderson, J. Vernon, 2008. "The agglomeration of headquarters," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 445-460, September.
  12. 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.
  13. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
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