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Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI

  • Markusen, James R.

Trade theory consists of a portfolio of models. What elements might be useful in modeling the offshoring of white-collar services, or do these issues call for an entirely fresh approach? I try to identifying some of the important aspects of this phenomenon and then argue that modeling could focus on (a) vertical fragmentation of production, (b) expansion of trade at the extensive margin, (c) fragments that differ in factor intensities and countries that differ in endowments, and (d) knowledge or capital stocks of countries or firms that are complementary to skilled labour, and create missing inputs for countries otherwise well suited to skill-intensive fragments. I argue that we can make good progress by selecting a number of 'modules' from existing theory. I use these to formulate a series of simple 'template' models which capture many of the characteristics of offshoring, and then use those models to identify the effects of technological or institutional changes which allow offshoring of white-collar services to occur.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5408.

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Date of creation: Dec 2005
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Handle: RePEc:cpr:ceprdp:5408
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  1. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
  2. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
  3. James R. Markusen & Anthony J. Venables, 2005. "A Multi-Country Approach to Factor-Proportions Trade and Trade Costs," NBER Working Papers 11051, National Bureau of Economic Research, Inc.
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  8. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc.
  9. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
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  11. Pol Antràs, 2003. "Incomplete Contracts and the Product Cycle," NBER Working Papers 9945, National Bureau of Economic Research, Inc.
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  13. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
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  15. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
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  18. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
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  20. Markusen, James R., 2001. "Contracts, intellectual property rights, and multinational investment in developing countries," Journal of International Economics, Elsevier, vol. 53(1), pages 189-204, February.
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  29. repec:hrv:faseco:4784029 is not listed on IDEAS
  30. J.P. Neary, 1995. "Factor Mobility and International Trade," CEP Discussion Papers dp0248, Centre for Economic Performance, LSE.
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