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Insourcing, Outsourcing, and Unemployment in the Spanish Auto Industry

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  • Lila J. Truett
  • Dale B. Truett

Abstract

This paper examines the role of outsourced intermediate goods, together with capital, labor, and insourced intermediate products, as inputs in Spain's motor vehicle production. Its findings are consistent with statistically significant economies of scale. Capital and labor are found to be substitutes, as are most of the other input pairs. However, capital and outsourced intermediate goods and labor and insourced intermediate goods appear to have complementary relationships, and the latter relationship has become stronger over the period of study. Any actions that decrease the price of one of the inputs in a complementary pair will increase the demand for the other input. Since labor and outsourced intermediate goods appear to be substitutes, a decrease in import prices as a result of further European integration will decrease the demand for domestic labor and exacerbate Spain's unemployment problem. A similar result holds for insourced and outsourced intermediate goods.

Suggested Citation

  • Lila J. Truett & Dale B. Truett, 2008. "Insourcing, Outsourcing, and Unemployment in the Spanish Auto Industry," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 702-713, November.
    • Handle: RePEc:bla:rdevec:v:12:y:2008:i:4:p:702-713
    DOI: 10.1111/j.1467-9361.2008.00396.x
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    References listed on IDEAS

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    1. Fuss,Melvyn A. & Waverman,Leonard, 2006. "Costs and Productivity in Automobile Production," Cambridge Books, Cambridge University Press, number 9780521031752, September.
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    Cited by:

    1. Truett, Lila J. & Truett, Dale B., 2014. "The South Korean auto industry's path to maturity," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 86-94.

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