Contractual Versus Generic Outsourcing: The Role of Proximity

Robert C. Feenstra () and Barbara Spencer ()

No 11885, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We explore the relationship between proximity of buyers and sellers and the organizational form of outsourcing. Outsourcing can be "contractual" in which suppliers undertake specific investments or involve "generic" market transactions. Proximity expands the variety of products sourced through contracts abroad rather than at home, but the range of generic imports is unchanged. A higher-quality foreign workforce raises the variety of contractual trade, but at the expense of generics. We confirm these predictions using data for ordinary versus processing exports from Chinese provinces to destination markets and also the predictions of an extended model that allows for multinational production.

JEL-codes: F1 L24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-int
Date: 2005-12
Note: ITI PR
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