Globalization and the Evolution of the Supply Chain: Who Gains and Who Loses?

35 Pages Posted: 24 Dec 2003

See all articles by Masahisa Fujita

Masahisa Fujita

Kyoto University - Institute of Economic Research

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2003

Abstract

This Paper focuses on two distinct facets of globalization: the decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities within firms. When the unskilled have about the same wage in the two regions, the decrease of these costs fosters the gradual agglomeration of plants in the core region accommodating the headquarters. By contrast, when the wage gap is significant, the process of integration eventually triggers the relocation of plants into the periphery. In particular, when falling communication costs drives the process of relocation, the welfare of all workers living in the core goes down whereas the welfare of those who reside in the periphery rises.

Keywords: Information technologies, communication costs, agglomeration, headquarters, plants, supply chain, relocation

JEL Classification: F12, L13, R13

Suggested Citation

Fujita, Masahisa and Thisse, Jacques-François, Globalization and the Evolution of the Supply Chain: Who Gains and Who Loses? (December 2003). CEPR Discussion Paper No. 4152. Available at SSRN: https://ssrn.com/abstract=482902

Masahisa Fujita

Kyoto University - Institute of Economic Research ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto 606-8501
Japan
+81 75 753 7122 (Phone)
+81 75 753 7198 (Fax)

Jacques-François Thisse (Contact Author)

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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