Industry Dynamics of Offshoring: The Case of Hard Disk Drives
American Economic Journal: Microeconomics, (February 2018) Forthcoming
79 Pages Posted: 18 Dec 2010 Last revised: 5 Sep 2017
Date Written: January 26, 2017
This paper uncovers a novel pattern of offshoring dynamics in a high-tech industry, and proposes a structural model to explain it. Specifically, the hard disk drive industry (1976-98) witnessed massive waves of entry, exit, and the relocation of manufacturing plants to low-cost countries, in which shakeouts occurred predominantly among home firms and almost all survivors were offshore firms. I build and estimate a dynamic offshoring game with entry/exit to measure the benefits and costs of offshoring, investigate the relationship between offshoring and market structure, and assess the impacts of hypothetical government interventions.
Keywords: Dynamic Oligopoly, Industry Life Cycle, Offshoring, Strategic Trade Policy
JEL Classification: F12, F13, F14, F21, F23, L13, L52, L63
Suggested Citation: Suggested Citation