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Fragmentation, Outsourcing and the Service Sector

Author

Listed:
  • Ngo Van Long
  • Ray Riezman
  • Antoine Soubeyran

Abstract

We show that the growth of the service sector facilitates outsourcing, or fragmentation of production. Services link production blocks, and allows the breaking up of integrated production. The cost of aggregate service decreases as the number of specialized services increases. A country with a greater number of specialized services tends to export components that are service-intensive. When international trade in specialized services are permitted, the country with an advanced service sector will outsource most of the manufacturing activities. Thus free trade in specialized services tends to increase fragmentation. On the other hand, if there are high transport costs with a bias against complex specialized services, then free trade in specialized services may work against fragmentation. On montre que la croissance du secteur des services facilite la fragmentation de la production. Les services relient les blocs de production et permettent la dispersion de la production intégrée. Un pays possédant un grand nombre de services spécialisés a tendance à exporter les pièces dont la production utilise intensément les services. Avec la libéralisation de l'échange des services, les pays possédant un secteur de services avancé tendent à impartir la fabrication des pièces. Par conséquent, la libéralisation du commerce augmente la fragmentation. Par contre, si les coûts de transport sont élevés pour les services les plus complexes, le libre échange des services spécialisés peut réduire la fragmentation.

Suggested Citation

  • Ngo Van Long & Ray Riezman & Antoine Soubeyran, 2001. "Fragmentation, Outsourcing and the Service Sector," CIRANO Working Papers 2001s-43, CIRANO.
    • Handle: RePEc:cir:cirwor:2001s-43
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    File URL: https://cirano.qc.ca/files/publications/2001s-43.pdf
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    References listed on IDEAS

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    Cited by:

    1. Long, Ngo Van, 2005. "Outsourcing and technology spillovers," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 297-304.
    2. Nicholas Sim, 2004. "International production sharing and economic development: moving up the value-chain for a small-open economy," Applied Economics Letters, Taylor & Francis Journals, vol. 11(14), pages 885-889.
    3. Gross, Dominique M. & Raff, Horst & Ryan, Michael, 2005. "Inter- and intra-sectoral linkages in foreign direct investment: evidence from Japanese investment in Europe," Journal of the Japanese and International Economies, Elsevier, vol. 19(1), pages 110-134, March.

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    More about this item

    Keywords

    Fragmentation; outsourcing; service sector; Fragmentation; impartition; secteur des services;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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