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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 Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
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  9. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
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  28. repec:hrv:faseco:4784029 is not listed on IDEAS
  29. Jim Markusen & Anthony Venables, 2005. "A Multi-Country Approach to Factor Proporations Trade and Trade Costs," The Institute for International Integration Studies Discussion Paper Series iiisdp051, IIIS.
  30. 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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  36. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
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