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Globalization and the Evolution of the Supply Chain: who gains and who loses?

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  • Fujita, Masahisa
  • Thisse, Jacques-Francois

Abstract

This paper focuses on two distinct facets of globalization: the decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities within firms.When the unskilled have about the same wage in the two regions, the decrease of these costs fosters the gradual agglomeration of plants in the core region accommodating the headquarters. By contrast, when the wage gap is significant, the process of integration eventually triggers the re-location of plants into the periphery. In particular, when the process of re-location is driven by falling communication costs, the welfare of all workers living in the core goes down whereas the welfare of those who reside in the periphery rises.

Suggested Citation

  • Fujita, Masahisa & Thisse, Jacques-Francois, 2004. "Globalization and the Evolution of the Supply Chain: who gains and who loses?," IDE Discussion Papers 5, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper5
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    References listed on IDEAS

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    6. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
    7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
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    More about this item

    Keywords

    Information technologies (technology); Communication costs; Agglomeration; Headquarters; Plants; Supply chain; Re-location; Globalization; International economic relations; Communication; 情報技術; グローバリゼーション; 国際経済; コミュニケーション;
    All these keywords.

    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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