Title

Outsourcing in a Global Economy

Author(s)

Gene M. Grossman Gene Grossman (Princeton University)

Elhanan Helpman Elhanan Helpman (Harvard University, Tel Aviv University, and CIAR)

Abstract

We study the determinants of the location of sub-contracted activity in a general equilibrium model of outsourcing and trade. We model outsourcing as an activity that requires search for a partner and relationship-specific investments that are governed by incomplete contracts. The extent of international outsourcing depends inter alia on the thickness of the domestic and foreign market for input suppliers, the relative cost of searching in each market, the relative cost of customizing inputs, and the nature of the contracting environment in each country.

Creation Date

2002-01

Section URL ID

WWSEcon

Paper Number

dp218.pdf

URL

http://www.princeton.edu/~grossman/outsourcing.pdf

File Function

Jel

F12, L14, L22, D23

Keyword(s)

outsourcing, imperfect contracting, trade in intermediate goods, intra-industry trade

Suppress

false

Series

4