Arbeitspapier
Incomplete contracts and the impact of globalization on consumer welfare
We embed a North-South trade model into an incomplete contracts setting where the production of heterogeneous firms can be geographically separated. When a Northern headquarter contracts with a Southern supplier instead of a Northern supplier, the presence of international incomplete contracts may lead to a higher price. As a result, trade liberalization, that induces offshoring, is not necessarily welfare-enhancing for consumers, despite the lower cost of labor in the South. In addition, firms which use the supplier's component intensively, offshore their supplier in the South using outsourcing. As trade costs fall, less component-intensive firms also offshore, but by vertically integrating their supplier. We argue that this organizational change increases production-shifting in the South, implying that a larger number of varieties will be produced in the South where contracts are incomplete. We show that, this may reduce consumer welfare in both countries.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 3484
- Klassifikation
-
Wirtschaft
Multinational Firms; International Business
Firm Organization and Market Structure
Real Estate Markets, Spatial Production Analysis, and Firm Location: General
- Thema
-
consumer welfare
incomplete contracts
hold-up problem
Globalisierung
Nord-Süd-Beziehungen
Offshoring
Unvollständiger Vertrag
Sunk Costs
Konsumentenrente
Wohlfahrtseffekt
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Defever, Fabrice
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2011
- Handle
- Letzte Aktualisierung
-
20.09.2024, 08:21 MESZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Defever, Fabrice
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2011