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How remote is the offshoring threat?

Listed author(s):
  • Keith Head

    (Sauder - Sauder School of Business [British Columbia] - UBC - University of British Columbia)

  • Thierry Mayer

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, PSE - Paris School of Economics)

  • John Ries

    (Sauder - Sauder School of Business [British Columbia] - UBC - University of British Columbia)

Advances in communication technology make it possible for workers in India to supply business services to head offices located anywhere. This has the potential to put high-wage workers in direct competition with much lower paid Indian workers. Service trade, however, like goods trade, is subject to strong distance effects, implying that the remote supply of services remains limited. We investigate this proposition by deriving a gravity-like equation for service trade and estimating it for a large sample of countries and different categories of service trade. We find that distance costs are high but are declining over time. Our estimates suggest that delivery costs create a significant advantage for local workers relative to competing workers in distant countries.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00639596.

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Length:
Date of creation: May 2009
Publication status: Published in European Economic Review, Elsevier, 2009, 53 (4), pp.429-444. 〈10.1016/j.euroecorev.2008.08.001〉
Handle: RePEc:hal:cesptp:hal-00639596
DOI: 10.1016/j.euroecorev.2008.08.001
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00639596
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  29. repec:lmu:muenar:20646 is not listed on IDEAS
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