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Institut für Angewandte Wirtschaftsforschung (IAW), Tübingen >
IAW-Diskussionspapiere, Institut für Angewandte Wirtschaftsforschung (IAW) >
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http://hdl.handle.net/10419/39216
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| Title: | | Export-magnification effect of offshoring  |
| Authors: | | Kleinert, Jörn Zorell, Nico |
| Issue Date: | | 2010 |
| Series/Report no.: | | IAW-Diskussionspapiere 63 |
| Abstract: | | We propose a multi-country general equilibrium model with three sectors and heterogeneous firms to analyze the linkages between offshoring and exports. We model a world consisting of many advanced countries that trade differentiated goods among each other and one 'workbench country' that specializes on the production of an intermediate good and engages in inter-industry trade with each of the advanced countries. We show analytically that a closer integration of a 'workbench country' into the world economy allows more final goods producers to become exporters and raises the export quantities of incumbent exporters ('export-magnification effect'). At the same time, the least productive firms are forced to leave the market. Both effects raise the aggregate efficiency in the differentiated good sector. As a result, real wages and aggregate welfare unequivocally rise in the long run. However, this is associated with large-scale reallocations between sectors and within the differentiated good sector, which may be painful in the presence of frictions. |
| Subjects: | | offshoring multinational firms distance costs |
| JEL: | | F23 F12 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IAW-Diskussionspapiere, Institut für Angewandte Wirtschaftsforschung (IAW)
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