A New Push on An Old Fundamental: Understanding the Patterns of Outsourcing

Zhihao Yu ()

No 03-08, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: For what kind of intermediate input/service do firms often go outsourcing? This paper develops a model of two-stage production in which economies of scope are central to the production of both the intermediate and final good. The model is able to explain the patterns of outsourcing from the degree of product differentiation, economies of scope, and economies of scale in production of the intermediate input relative to that of the final good. The recent surge of outsourcing activities is explained by a new push (progress in the general purpose technology, e.g., information technology) on an old fundamental (economies of scope in production).

Keywords: Outsourcing; Economies of Scope; Vertical Disintegration; Vertical and horizontal Specialisation (search for similar items in EconPapers)
Pages: 22 pages
Date: 2003-07-15
New Economics Papers: this item is included in nep-ent
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Published: Carleton Economic Papers

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