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International Outsourcing and Factor Prices with Multistage Production

In: European Economic Integration, WTO Membership, Immigration and Offshoring

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  • Wilhelm Kohler

Abstract

We develop a dual representation of the technology of international fragmentation for an industry using 2 factors in a continuum of stages. We then derive a generalized factor price frontier which incorporates an endogenous adjustment of the margin of fragmentation. Using this frontier in a 2 ˟ 2 general equilibrium model, we investigate the role of outsourcing in the adjustment to a decline in the final output price of the multistage industry, and the attendant factor price effects. We also explore the implications of an improved technology of international fragmentation on the margin of fragmentation and on domestic factor prices.

Suggested Citation

  • Wilhelm Kohler, 2014. "International Outsourcing and Factor Prices with Multistage Production," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 8, pages 265-290, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814440196_0008
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    Cited by:

    1. Diakantoni, Antonia & Escaith, Hubert & Roberts, Michael & Verbeet, Thomas, 2017. "Accumulating trade costs and competitiveness in global value chains," WTO Staff Working Papers ERSD-2017-02, World Trade Organization (WTO), Economic Research and Statistics Division.
    2. Diakantoni, Antonia & Escaith, Hubert, 2014. "Trade in tasks, tariff policy and effective protection rates," MPRA Paper 60675, University Library of Munich, Germany.

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