International trade, flexible manufacturing, and outsourcing

Carsten Eckel

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This study analyzes the impact of opening up markets on the diffusion of flexible manufacturing in a general equilibrium framework. With flexible manufacturing, suppliers can service a range of downstream industries and do not have to be concerned about being held up. Instead, the vertical structure is determined by the trade-off between economies of scale in flexible manufacturing and product specificity of in-house production. The analysis derives a number of testable predictions with regard to firm size and productivity measures and shows that globalization can lead to a consolidation in upstream markets, lower real wages, and reduce welfare.

Date: 2009
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Published in Canadian Journal of Economics / Revue Canadienne d'Economique 4 42(2009): pp. 1449-1472

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20531

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