Outsourcing Versus FDI in Industry Equilibrium

Elhanan Helpman and Gene Grossman

No 3647, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the determinants of the extent of outsourcing and of direct foreign investment in an industry in which producers need specialized components. Potential suppliers must make a relationship-specific investment in order to serve each prospective customer. Such investments are governed by imperfect contracts. A final-good producer can manufacture components for itself, but the per-unit cost is higher than for specialized suppliers. We consider how the size of the cost differential, the extent of contractual incompleteness, the size of the industry, and the relative wage rate affect the organization of industry production.

Keywords: Outsourcing; Direct foreign investment; Multinational corporations; Imperfect contracting; Intra-industry trade (search for similar items in EconPapers)
JEL-codes: D23 F12 F23 L22 (search for similar items in EconPapers)
Date: 2002-11
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://cepr.org/publications/DP3647 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Outsourcing Versus FDI in Industry Equilibrium (2003)
Working Paper: Outsourcing versus FDI in Industry Equilibrium? (2002)
Working Paper: Outsourcing versus FDI in Industry Equilibrium (2002)
Working Paper: Outsourcing versus FDI in Industry Equilibrium (2002)
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:cpr:ceprdp:3647

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3647

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().