A New International Division of Labor in Europe: Offshoring and Outsourcing to Eastern Europe

Dalia Marin

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: Europe is reorganizing its international value chain. I document these changes in Europe’s international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intra-firm trade between Austria and Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labor in Europe. I find among other things that falling trade costs and falling corruption levels as well as improvements in the contracting environment in Eastern Europe are affecting the level of intra-firm imports from Eastern Europe. They are also favoring outsourcing over offshoring. Low organizational costs of hierarchies and large costs of hold-up (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) are favoring offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice.

Keywords: the empirics of global sourcing; intra-firm trade; contract enforcement; comparative advantage in Eastern Europe; empirical test of the theory of the firm (search for similar items in EconPapers)
JEL-codes: D23 D51 F11 L14 O11 (search for similar items in EconPapers)
Date: 2005-09
New Economics Papers: this item is included in nep-bec, nep-dev, nep-eec, nep-int and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://epub.ub.uni-muenchen.de/714/1/InternDivofLaborJEEA.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:714

Access Statistics for this paper

More papers in Discussion Papers in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg ().