Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267276 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 10043
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We analyse firms' sourcing decisions under institutional uncertainty in foreign countries. Firms can reduce their uncertainty by observing offshoring firms' behaviour. The model characterises a sequential offshoring equilibrium path, led by the most productive firms in the market. With multiple countries, information spillovers drive sourcing location choices, leading to multiple equilibria with implications for countries' comparative advantages and welfare. Using firm-level data from Colombia, we test for the determinants and timing of offshoring decisions. We also derive spatial probit structural models to identify the firms' dynamic trade-off when they decide on the offshoring location. We find supportive evidence for the model's predictions.
Subjects: 
global sourcing
institutions
uncertainty
information externalities
learning
sequential offshoring
specialisation patterns
comparative advantages
survival analysis
transition analysis
spatial probit
JEL: 
D81
D83
F10
F14
F23
Document Type: 
Working Paper
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