Fragmentation, Outsourcing and the Service Sector

Ngo Long, Raymond Riezman and Antoine Soubeyran

CIRANO Working Papers from CIRANO

Abstract: We show that the growth of the service sector facilitates outsourcing, or fragmentation of production. Services link production blocks, and allows the breaking up of integrated production. The cost of aggregate service decreases as the number of specialized services increases. A country with a greater number of specialized services tends to export components that are service-intensive. When international trade in specialized services are permitted, the country with an advanced service sector will outsource most of the manufacturing activities. Thus free trade in specialized services tends to increase fragmentation. On the other hand, if there are high transport costs with a bias against complex specialized services, then free trade in specialized services may work against fragmentation. On montre que la croissance du secteur des services facilite la fragmentation de la production. Les services relient les blocs de production et permettent la dispersion de la production intégrée. Un pays possédant un grand nombre de services spécialisés a tendance à exporter les pièces dont la production utilise intensément les services. Avec la libéralisation de l'échange des services, les pays possédant un secteur de services avancé tendent à impartir la fabrication des pièces. Par conséquent, la libéralisation du commerce augmente la fragmentation. Par contre, si les coûts de transport sont élevés pour les services les plus complexes, le libre échange des services spécialisés peut réduire la fragmentation.

Keywords: Fragmentation; outsourcing; service sector; Fragmentation; impartition; secteur des services (search for similar items in EconPapers)
JEL-codes: F12 L23 (search for similar items in EconPapers)
Date: 2001-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2001s-43

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