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Domestic And Global Sourcing

Author

Listed:
  • Wenli Cheng
  • Dingsheng Zhang

Abstract

This paper develops a general equilibrium Ricardian model with transaction costs to investigate the determinants of the firm's sourcing decision. It derives conditions under which different sourcing choices and corresponding trade patterns occur in general equilibrium. These conditions suggest that, inter alia, the choice between vertical integration and specialisation depends on the relative internal transaction costs associated with vertical integration and external transaction costs associated with international outsourcing; and that the equilibrium sourcing structures and trade patterns are consistent with a refined theory of comparative advantage that incorporates the effects of transaction costs in international trade.

Suggested Citation

  • Wenli Cheng & Dingsheng Zhang, 2005. "Domestic And Global Sourcing," Monash Economics Working Papers 05/05, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2005-05
    as

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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2005/0505domesticglobaloutsourcing.pdf
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    References listed on IDEAS

    as
    1. Yew-Kwang Ng & Heling Shi & Guang-Zhen Sun (ed.), 2003. "The Economics of E-Commerce and Networking Decisions," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-4039-3837-4, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    endogenous sourcing decisions; transaction costs; Ricardian model;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • F19 - International Economics - - Trade - - - Other

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