A Strategic Approach to Offshoring

12 Pages Posted: 21 Jan 2014

See all articles by Reza Oladi

Reza Oladi

Utah State University - College of Business - Department of Economics

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics

John Gilbert

Utah State University - College of Business - Department of Economics

Date Written: March 2014

Abstract

In the context of a simple model of strategic offshoring, we investigate the reasons why firms may simultaneously source fragments domestically and internationally. We explore the impacts of offshoring on the production pattern of finished goods, tradable fragment prices, and welfare in a partial equilibrium context. The policy implications of attempts to restrict offshoring are also considered. The analysis shows that an offshoring equilibrium may exist in the absence of comparative advantage in fragments, that offshoring is welfare improving if the costs are sufficiently small, and that attempts (by both countries) to prevent offshoring may paradoxically lower both fragment use and price.

Suggested Citation

Oladi, Reza and Beladi, Hamid and Gilbert, John, A Strategic Approach to Offshoring (March 2014). Economics & Politics, Vol. 26, Issue 1, pp. 1-12, 2014. Available at SSRN: https://ssrn.com/abstract=2382307 or http://dx.doi.org/10.1111/ecpo.12023

Reza Oladi (Contact Author)

Utah State University - College of Business - Department of Economics ( email )

3530 Old Main Hill
Logan, UT 84322-3530
United States

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics ( email )

One UTSA Circle
P.O. Box 5636
San Antonio, TX 78249
United States
210-458-7038 (Phone)
210-458-7040 (Fax)

John Gilbert

Utah State University - College of Business - Department of Economics ( email )

3530 Old Main Hill
Logan, UT 84322-3530
United States
435-797-2314 (Phone)
435-797-2701 (Fax)

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