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

Author

Listed:
  • Masahisa Fujita

    (Institute of Economic Research, Kyoto University)

  • Jacques-Francois Thisse

    (CORE, Universite catholique de Louvain (Belgium), CERAS, Ecole nationale des ponts et chaussees (France) and CEPR.)

Abstract

This paper focuses on two distint 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 trigers the re-location of plants into the periphery. In particular, when the preocess 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

  • Masahisa Fujita & Jacques-Francois Thisse, 2003. "Globalization and the Evolution of the Supply Chain: who gains and who loses?," KIER Working Papers 571, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:571
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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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