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Offshoring in a Ricardian World

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Author Info
Andrés Rodríguez-Clare ()

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Abstract

Falling costs of coordination and communication have allowed firms in rich countries to fragment their production process and offshore an increasing share of the value chain to low-wage countries. This paper proposes a Ricardian model where both of these effects are present and analyzes the effects of increased fragmentation and offshoring in the short run and in the long run (when technology levels are endogenous). Long run analysis shows that in particular the rich country always gains from increased fragmentation , whereas poor countries see their static gains partially eroded by a decline in their research efforts.

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Paper provided by esocialsciences.com in its series Working Papers with number id:1043.

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Date of creation: 2007
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Handle: RePEc:ess:wpaper:id:1043

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Related research
Keywords: fragmentation; outsourcing; low-wage countries effect; research efforts.; value chain; Economics;

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References listed on IDEAS
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.:
  1. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Department of Economics 95-14, California Davis - Department of Economics.
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  2. James Markusen, 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," NBER Working Papers 11827, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Fernando Alvarez & Robert E. Lucas, 2005. "General Equilibrium Analysis of the Eaton-Kortum Model of International Trade," NBER Working Papers 11764, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Martin Neil Baily & Robert Z. Lawrence, 2004. "What Happened to the Great U.S. Job Machine? The Role of Trade and Electronic Offshoring," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2004-2), pages 211-284. [Downloadable!]
  5. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer. [Downloadable!] (restricted)
  6. Baldwin, Richard & Robert-Nicoud, Frédéric, 2007. "Offshoring: General Equilibrium Effects on Wages, Production and Trade," CEPR Discussion Papers 6218, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. repec:fth:bosecd:110 is not listed on IDEAS
  8. Eaton, Jonathan & Kortum, Samuel, 2001. "Technology, trade, and growth: A unified framework," European Economic Review, Elsevier, vol. 45(4-6), pages 742-755, May. [Downloadable!] (restricted)
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  9. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "The rise of offshoring: it's not wine for cloth anymore," Proceedings, Federal Reserve Bank of Kansas City, pages 59-102. [Downloadable!]
  10. Donald R. Davis & David E. Weinstein, 2002. "Technological Superiority and the Losses from Migration," NBER Working Papers 8971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September. [Downloadable!] (restricted)
  12. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February. [Downloadable!] (restricted)
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  13. Deardorff, Alan V., 2005. "A trade theorist's take on skilled-labor outsourcing," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 259-271. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Task Trade between Similar Countries," NBER Working Papers 14554, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Devashish Mitra & Priya Ranjan, 2007. "Offshoring and Unemployment," IZA Discussion Papers 2805, Institute for the Study of Labor (IZA). [Downloadable!]
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