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Offshoring with endogenous NGO activism

Author

Listed:
  • Sebastian Krautheim

    (University of Passau)

  • Thierry Verdier

    (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPR - Center for Economic Policy Research - CEPR, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

The process of globalization is characterized by an impressive growth of global value chains, as well as the proliferation of non-governmental organizations (NGOs) interacting with multinational firms. This paper presents a model of offshoring and NGO–firm interactions in which offshoring to a low-regulation country allows a monopolist to implement a "dirty" technology undesired by consumers. Consumers can reduce the incentive for dirty production by financing an NGO monitoring the firm. NGO emergence and offshoring can arise as joint and interacting outcomes. For a range of trade costs, NGO emergence allows firms to capture gains from globalization, which would otherwise be unattainable. Somewhat paradoxically, NGO emergence can be at the expense of consumers possibly leading to welfare losses through offshoring.

Suggested Citation

  • Sebastian Krautheim & Thierry Verdier, 2016. "Offshoring with endogenous NGO activism," PSE-Ecole d'économie de Paris (Postprint) halshs-01509763, HAL.
  • Handle: RePEc:hal:pseptp:halshs-01509763
    DOI: 10.1016/j.jinteco.2016.03.009
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01509763
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    Cited by:

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    3. Pamina Koenig & Sandra Poncet, 2019. "Reputation and (un)fair trade: Effects on French importers from the Rana Plaza collapse," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02350112, HAL.
    4. Sophie Hatte & Pamina Koenig, 2020. "The Geography of NGO Activism against Multinational Corporations," World Bank Economic Review, World Bank Group, vol. 34(1), pages 143-163.
    5. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2018. "Technology diffusion, international integration and participation in developing economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 15(1), pages 215-253, January.
    6. Pamina Koenig & Sandra Poncet, 2019. "Reputation and (un)fair trade: Effects on French importers from the Rana Plaza collapse," Post-Print halshs-02350112, HAL.
    7. Pamina Koenig, 2017. "Notes on Sigwatch's NGO campaign database," PSE Working Papers halshs-01671758, HAL.

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    More about this item

    Keywords

    NGOs; Offshoring; Credence goods; Globalization;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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