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

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  • FUJITA, Masahisa
  • THISSE, Jacques-François

Abstract

This paper focuses on two distint 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 preocess 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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Suggested Citation

  • FUJITA, Masahisa & THISSE, Jacques-François, 2006. "Globalisation and the evolution of the supply chain: who gains and who loses?," LIDAM Reprints CORE 1968, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1968
    DOI: 10.1111/j.1468-2354.2006.00397.x
    Note: In : International Economic Review, 47(3), 811-836, 2006
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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