EconPapers    
Economics at your fingertips  
 

Global Sourcing of a Complex Good

Johannes Van Biesebroeck () and Lijun Zhang

No 8614, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze a firm that produces a final good from multiple intermediates that can each be sourced domestically or from a low-wage country. The model explicitly incorporates that sourcing decisions of intermediates are interdependent. Equilibrium predictions depend crucially on a key modeling assumption--the nature of the trade friction that foreign production has to overcome. If production abroad involves a fixed cost, offshoring one intermediate unambiguously facilitates offshoring of other intermediates. However, if production abroad involves incomplete contracts, offshoring one intermediate almost always makes it more difficult to offshore others. We illustrate that the pattern in prices at which successive automotive parts are imported into the U.S. accords better with the predictions of the incomplete contracting model, except for a few countries with the best governance indicators.

Keywords: FDI; Outsourcing; property rights (search for similar items in EconPapers)
JEL-codes: D23 F12 L23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis and nep-int
Date: 2011-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8614 (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: Interdependent product cycles for globally sourced intermediates (2014) Downloads
Working Paper: Global sourcing of a complex good (2011) Downloads
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:8614

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=8614

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 ().

 
Page updated 2019-12-10
Handle: RePEc:cpr:ceprdp:8614