Incomplete specialization and offshoring across Europe

Arbeitspapier

Recent empirical studies have been searching for evidence on and driving forces for offshoring. Frequently, this has been done by analyzing gross trade flows related to offshore activities using gravity equations augmented by ad hoc measures of supply-side country differences. This paper suggests that gravity formulations of this sort are mis-specified, due to theoretically unmotivated attempts to allow for both complete and incomplete specialization influences on gross trade flows within the same gravity framework. We suggest an alternative specification rooted in incomplete specialization that views bilateral gravity equations as statistical relationships constrained on countries' multilateral specialization patterns. This view reveals that countries' multilateral specialization incentives drive bilateral trade, corresponding to and competing with the role of multilateral trade resistance. Our results support evidence for offshoring activities across Europe, driven by countries' multilateral specialization incentives, as expressed by supply-side country differences relative to the rest of the world.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3809

Classification and Topics

• Classification: Wirtschaft ; Empirical Studies of Trade ; Trade and Labor Market Interactions ; Contracting Out; Joint Ventures; Technology Licensing
• Subject: international trade ; gravity model ; offshoring ; panel data ; European Union

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Frensch, Richard ; Hanousek, Jan ; Kocenda, Evézen
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/57945
• Last update: 10.03.2025, 11:42 AM CET