To Outsource or Not to Outsource Inn North-South Trade
This paper investigates outsourcing and foreign direct investment (FDI) decisions based on factor price differentials in North-South trade when the production activity is fragmented into two independent processes. It is shown that (a) when the Southern firm does not have the Northern firm-specific technology for a fragmentable process and capital is imperfectly (perfectly) mobile between countries, the Northern firm produces the final product by outsourcing the other fragmentable process from the South through either FDI or outsourcing to a Southern outsourcee); (b) when the Southern firm acquires the Northern firm-specific technology for the fragmentable process and capital is imperfectly (perfectly) mobile, only the Northern firm produces the final product by outsourcing the other process via FDI and drives out the Southern firm from the world market (both the Northern and Southern firms produce the final product); (c) however, in all the cases, outsourcing is unidirectional from the North to the South.
|Date of creation:||01 Apr 2010|
|Date of revision:|
|Publication status:||Published in Frontiers in Finance and Economics, April 2010, vol. 7 no. 1, pp. 60-81|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages C166-C185, 03.
- Gorg, Holger & Hanley, Aoife, 2005. "Labour demand effects of international outsourcing: Evidence from plant-level data," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 365-376.
- Choi, E. Kwan, 2007.
"To outsource or not to outsource in an integrated world,"
International Review of Economics & Finance,
Elsevier, vol. 16(4), pages 521-527.
- Choi, E. Kwan, 2007. "To Outsource or Not to Outsource in an Integrated World," Staff General Research Papers 12535, Iowa State University, Department of Economics.
- Elhanan Helpman, 2006.
"Trade, FDI, and the Organization of Firms,"
NBER Working Papers
12091, National Bureau of Economic Research, Inc.
- Helpman, Elhanan, 2006. "Trade, FDI and the Organization of Firms," CEPR Discussion Papers 5589, C.E.P.R. Discussion Papers.
- Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
- Hartmut Egger & Peter Egger, 2000. "Outsourcing and skill-specific employment in a small economy: Austria and the fall of the Iron Curtain," Economics working papers 2000-24, Department of Economics, Johannes Kepler University Linz, Austria.
- Chi-Chur Chao & Eden S. H. Yu, 2014.
"Content Protection, Urban Unemployment, and Welfare,"
World Scientific Book Chapters,
in: TRADE-RELATED INVESTMENT MEASURES Theory and Applications, chapter 8, pages 127-140
World Scientific Publishing Co. Pte. Ltd..
- Chi-Chur Chao & Eden S. H. Yu, 1993. "Content Protection, Urban Unemployment and Welfare," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 481-92, May.
- Long, Ngo Van, 2005. "Outsourcing and technology spillovers," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 297-304.
- Baldwin, Richard & Ottaviano, Gianmarco, 1998.
"Multiproduct Multinationals and Reciprocal FDI Dumping,"
CEPR Discussion Papers
1851, C.E.P.R. Discussion Papers.
- Baldwin, Richard E. & Ottaviano, Gianmarco I. P., 2001. "Multiproduct multinationals and reciprocal FDI dumping," Journal of International Economics, Elsevier, vol. 54(2), pages 429-448, August.
- Richard E. Baldwin & Gianmarco I. P. Ottaviano, 1998. "Multiproduct Multinationals and Reciprocal FDI Dumping," NBER Working Papers 6483, National Bureau of Economic Research, Inc.
- Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004.
"Export versus FDI with Heterogeneous Firms,"
3229098, Harvard University Department of Economics.
- Jagdish Bhagwati & Arvind Panagariya, 2004.
"The Muddles over Outsourcing,"
Journal of Economic Perspectives,
American Economic Association, vol. 18(4), pages 93-114, Fall.
When requesting a correction, please mention this item's handle: RePEc:isu:genres:34997. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Curtis Balmer)
If references are entirely missing, you can add them using this form.