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Globalization and the evoluton of the supply chain: WHO gains and who loses?

Author

Listed:
  • Masahisa Fujita

    (Kyōto daigaku = Kyoto University)

  • Jacques-François Thisse

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, CEPR - Center for Economic Policy Research, CERAS - Centre d'enseignement et de recherche en analyse socio-économique - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article focuses on two distinct facets of globalization: decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities. When the unskilled have about the same wage in two regions, decrease of these costs fosters the agglomeration of plants in the core accommodating headquarters. When the wage gap is significant, process of integration eventually triggers the relocation of plants into the periphery. When this process of relocation is driven by falling communication costs, the welfare of all workers in the core falls whereas that in the periphery rises.

Suggested Citation

  • Masahisa Fujita & Jacques-François Thisse, 2006. "Globalization and the evoluton of the supply chain: WHO gains and who loses?," Post-Print halshs-00754139, HAL.
    • Handle: RePEc:hal:journl:halshs-00754139
    DOI: 10.1111/j.1468-2354.2006.00397.x
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    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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