EconStor >
Fondazione Eni Enrico Mattei (FEEM), Mailand >
FEEM Working Papers, Fondazione Eni Enrico Mattei  >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/53273
  
Title:Firm heterogeneity, contract enforcement, and the industry dynamics of offshoring PDF Logo
Authors:Ottaviano, Gianmarco I. P.
Naghavi, Alireza
Issue Date:2009
Series/Report no.:Nota di lavoro // Fondazione Eni Enrico Mattei: Global challenges 54.2009
Abstract:We develop an endogenous growth model to study the long run consequences of offshoring with firm heterogeneity and incomplete contracts. In so doing, we model offshoring as the geographical fragmentation of a firm's production chain between a home upstream division and a foreign downstream one. On the positive side, we show that, when contracts are incomplete, the possibility of offshoring has favorable implications for economic growth. Yet, offshoring induced by a higher bargaining power of the upstream division can hamper growth: while there is always a positive correlation between upstream bargaining weight and offshoring activities, there is a non-monotonic relationship between these and growth. Whether offshoring with incomplete contracts also increases consumption depends on firm heterogeneity. On the normative side, we show that, whereas with complete contract efficiency is restored through a subsidy to R&D only, with incomplete contracts a production subsidy to offshored upstream divisions is needed too.
Subjects:Offshoring
Heterogeneous Firms
Incomplete Contracts
Growth
Industry Dynamics
JEL:D23
F23
L23
O31
O43
Document Type:Working Paper
Appears in Collections:FEEM Working Papers, Fondazione Eni Enrico Mattei

Files in This Item:
File Description SizeFormat
645177806.pdf527.18 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/53273

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.