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Outsourcing in a Global Economy

56 Pages Posted: 15 Oct 2002  

Gene M. Grossman

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elhanan Helpman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: August 2002

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.

Keywords: Outsourcing, Imperfect Contracting, Trade in Intermediate Goods, Intra-industry Trade

JEL Classification: F12, L14, L22, D23

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan, Outsourcing in a Global Economy (August 2002). Harvard Institute Research Working Paper No. 1966. Available at SSRN: https://ssrn.com/abstract=336261 or http://dx.doi.org/10.2139/ssrn.336261

Gene M. Grossman

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

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London, EC1V 3PZ
United Kingdom

National Bureau of Economic Research (NBER)

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Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

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United States
609-258-4823 (Phone)
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Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Elhanan Helpman (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-4690 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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