Financial Advantage, Outsourcing and FDI Under Wage Uncertainity

E. Kwan Choi and Jai-Young Choi
Authors registered in the RePEc Author Service: Eun Kwan Choi

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper investigates outsourcing and foreign direct investment (FDI) decisions in North–South trade under conditions of wage uncertainty. The North has a financial advantage to raise capital, but the South has the advantage of low wages. If the expected outsourcing cost is lower than the in-house production cost, some outsourcing to a Southern firm is optimal. However, outsourcing to an FDI firm is superior to outsourcing to a Southern firm as well as in-house production. This finding is consistent with the rising foreign direct investment in China by Northern firms.

Keywords: outsourcing; foreign direct investment (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
Date: 2013-04-04
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Citations: View citations in EconPapers (3)

Published in North American Journal of Economics and Finance, January 2013, vol. 24, pp. 260-267

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Related works:
Journal Article: Financial advantage, outsourcing and FDI under wage uncertainty (2013)
Working Paper: Financial Advantage, Outsourcing and FDI under Wage Uncertainty (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:36077

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