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Industry Dynamics of Offshoring: The Case of Hard Disk Drives

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  • Mitsuru Igami

Abstract

This paper uncovers a novel pattern of offshoring dynamics in a high-tech industry, and proposes a structural model to explain it. Specifically, the hard disk drive industry (1976-1998) witnessed massive waves of entry, exit, and the relocation of manufacturing plants to low-cost countries, in which shakeouts occurred predominantly among home firms and almost all survivors were offshore firms. I build and estimate a dynamic offshoring game with entry/exit to measure the benefits and costs of offshoring, investigate the relationship between offshoring and market structure, and assess the impacts of hypothetical government interventions.

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  • Mitsuru Igami, 2018. "Industry Dynamics of Offshoring: The Case of Hard Disk Drives," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 67-101, February.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:1:p:67-101
    Note: DOI: 10.1257/mic.20150256
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    1. Ulrich Doraszelski & Kenneth L. Judd, 2019. "Dynamic stochastic games with random moves," Quantitative Marketing and Economics (QME), Springer, vol. 17(1), pages 59-79, March.
    2. Teresa C. Fort & Justin R. Pierce & Peter K. Schott, 2018. "New Perspectives on the Decline of US Manufacturing Employment," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 47-72, Spring.
    3. Steven T Berry & Giovanni Compiani, 2023. "An Instrumental Variable Approach to Dynamic Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(4), pages 1724-1758.
    4. Montag, Felix, 2023. "Mergers, foreign competition, and jobs: Evidence from the U.S. appliance industry," Working Papers 326, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    5. Felix Montag, 2023. "Mergers, Foreign Competition, and Jobs: Evidence from the U.S. Appliance Industry," Rationality and Competition Discussion Paper Series 378, CRC TRR 190 Rationality and Competition.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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