Trade between China and the Netherlands: A Case Study of Trade in Tasks

21 Pages Posted: 18 Jul 2011

See all articles by Frank A. G. den Butter

Frank A. G. den Butter

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Raphie Hayat

Utrecht University

Date Written: July 15, 2011

Abstract

In this era of globalization, with decreasing transaction costs and world wide specialization, the character of international trade changes. The traditional trade in products in line with the Ricardian theory of comparative advantages is replaced by a trade in tasks. This paper discusses the trade between China and the Netherlands from that perspective. Using an augmented gravity model for trade, we find that Dutch in-house offshoring to China and the Dutch distribution function can explain a large part of trade between these two countries. Thus, the Netherlands fulfils the distributional role of gateway to the European hinterland for China, while China acts as producer and assembler of goods for the Netherlands. These are typical examples of outsourcing tasks, rather than outsourcing the production of goods.

Keywords: trade in tasks, transaction costs, organization of production, offshoring, asset specificity, gravity model

JEL Classification: F14, D23, L23

Suggested Citation

den Butter, Frank A.G. and Hayat, Raphie, Trade between China and the Netherlands: A Case Study of Trade in Tasks (July 15, 2011). Available at SSRN: https://ssrn.com/abstract=1887787 or http://dx.doi.org/10.2139/ssrn.1887787

Frank A.G. Den Butter

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Raphie Hayat (Contact Author)

Utrecht University ( email )

Kriekenpitplein 21-22
Utrecht, 3584 EC
Netherlands

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