Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241865 
Year of Publication: 
2021
Citation: 
[Journal:] Canadian Journal of Economics/Revue canadienne d'économique [ISSN:] 1540-5982 [Volume:] 54 [Issue:] 2 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2021 [Pages:] 623-647
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
We present a two-region general equilibrium model in which firms exploit international wage differences by offshoring parts of the production process. Firms have to take into account that production steps follow a strict sequence and that transporting intermediate goods across borders is costly. We analyze how a change in transport costs affects offshoring patterns as well as factor prices, accounting for the general equilibrium effects of firms’ decisions. As we demonstrate, a decline in transport costs is likely to have a non-monotonic influence on relative wages and on the volume of offshoring depending on the emergence of different firm types, with domestic wages first decreasing as lower transport costs induce firms to perform large parts of the production chain abroad and then increasing as even lower transport costs provide an incentive to select the lowest-cost location for each production step.
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
Document Version: 
Published Version

Files in This Item:
File
Size
632.09 kB





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