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

26 Pages Posted: 1 Mar 2007

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)

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Abstract

This article focuses on two distinct facets of globalization: decrease in the trade costs of goods and the decline of communication costs between headquarters and production facilities. When the unskilled have about the same wage in two regions, decrease of these costs fosters the agglomeration of plants in the core accommodating headquarters. When the wage gap is significant, process of integration eventually triggers the relocation of plants into the periphery. When this process of relocation is driven by falling communication costs, the welfare of all workers in the core falls whereas that in the periphery rises.

Suggested Citation

Fujita, Masahisa and Thisse, Jacques-François, Globalization and the Evolution of the Supply Chain: Who Gains and Who Loses?. International Economic Review, Vol. 47, No. 3, pp. 811-836, August 2006. Available at SSRN: https://ssrn.com/abstract=920528 or http://dx.doi.org/10.1111/j.1468-2354.2006.00397.x

Masahisa Fujita (Contact Author)

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

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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