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Global Sourcing

Author

Listed:
  • Pol Antras
  • Elhanan Helpman

Abstract

We present a North—South model of international trade in which differentiated products are developed in the North. Sectors are populated by final-good producers who differ in productivity levels. Based on productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Final-good producers and their suppliers must make relationship-specific investments, both in an integrated firm and in an arm’s-length relationship. We describe an equilibrium in which firms with diferent productivity levels choose diferent ownership structures and supplier locations, i. e. , they choose different organizational forms. We then study the efects of within-sectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms. The analysis sheds light on the structure of foreign trade within and across industries.

Suggested Citation

  • Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
    • Handle: RePEc:fth:harver:2005
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    File URL: http://www.economics.harvard.edu/pub/hier/2003/HIER2005.pdf
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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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