We explore the relationship between proximity of buyers and sellers and the organizational form of outsourcing. Outsourcing can be "contractual" in which suppliers undertake specific investments or involve "generic" market transactions. Proximity expands the variety of products sourced through contracts abroad rather than at home, but the range of generic imports is unchanged. A higher-quality foreign workforce raises the variety of contractual trade, but at the expense of generics. We confirm these predictions using data for ordinary versus processing exports from Chinese provinces to destination markets and also the predictions of an extended model that allows for multinational production.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11885.
Length: Date of creation: Dec 2005 Date of revision: Handle: RePEc:nbr:nberwo:11885
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Find related papers by JEL classification: F1 - International Economics - - Trade L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
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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.:
Dalia Marin & Thierry Verdier, 2001.
"Power Inside the Firm and the Market: A General Equilibrium Approach,"
Discussion Papers
109, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich, revised Apr 2006.
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