Arbeitspapier

Temporary shocks and offshoring: the role of external economies and firm heterogeneity

We construct a model of offshoring with externalities and firm heterogeneity. Due to the presence of externalities, temporary shocks like the Y2K problem can have permanent effects, i.e., they can permanently raise the extent of offshoring in an industry. Also, the initial advantage of a country as a potential host for outsourcing activities can create a lock in effect, whereby late movers have a comparative disadvantage. Furthermore, the existence of firm heterogeneity along with externalities can help explain the dynamic process of offshoring, where the most productive firms offshore first and the others follow later. Finally, we work out some unexpected welfare implications which show that net industry profits can be lower in an outsourcing equilibrium than in a regime of no outsourcing. Consumer welfare rises, and under fairly plausible conditions this effect can offset the negative impact on profits.

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 2811

Klassifikation
Wirtschaft
Thema
Offshoring
Outsourcing
Externer Effekt
Schock
Nord-Süd-Beziehungen
Direktinvestition
Wohlfahrtseffekt
Theorie
Industriestaaten
Entwicklungsländer

Ereignis
Geistige Schöpfung
(wer)
Mitra, Devashish
Ranjan, Priya
Ereignis
Veröffentlichung
(wer)
Institute for the Study of Labor (IZA)
(wo)
Bonn
(wann)
2007

Handle
URN
urn:nbn:de:101:1-20080401190
Letzte Aktualisierung
10.03.2025, 11:41 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Mitra, Devashish
  • Ranjan, Priya
  • Institute for the Study of Labor (IZA)

Entstanden

  • 2007

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