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Global Sourcing

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  • Antras, Pol
  • Helpman, Elhanan

Abstract

We present a North†South model of international trade in which differentiated products are developed in the North. Sectors are populated by final†good producers who differ in productivity levels. On the basis of productivity and sectoral characteristics, firms decide whether to integrate into the production of intermediate inputs or outsource them. In either case they have to decide from which country to source the inputs. Final†good producers and their suppliers must make relationship†specific investments, both in an integrated firm and in an arm’s†length relationship. We describe an equilibrium in which firms with different productivity levels choose different ownership structures and supplier locations. We then study the effects of within†sectoral heterogeneity and variations in industry characteristics on the relative prevalence of these organizational forms.

Suggested Citation

  • Antras, Pol & Helpman, Elhanan, 2004. "Global Sourcing," Scholarly Articles 3196327, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:3196327
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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