Multi-Product Offshoring

Carsten Eckel and Michael Irlacher

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: In this paper, we incorporate offshoring of labor-intensive goods in a model with multi-product firms, and explore its implications in partial and general oligopolistic equilibrium. We identify important aspects of this phenomenon and argue that improvements in offshoring opportunities can affect the geographic organization of a firm and its product range. Multi-product firms internalize supply linkages (flexible manufacturing) and demand linkages (cannibalization effect). In partial equilibrium, we find that more products are produced offshore on a larger scale and firms expand their product range with better prospects for offshoring. We identify the cannibalization effect as an important transmission mechanism within multi-product firms and show that the latter effect hits domestic labor demand in addition to the well-known relocation effect. Interestingly in general equilibrium these effects lead to adjustments in domestic factor prices and may cause a partial re-relocation of product lines.

Keywords: Multi-Product Firms; Cannibalization Effect; Product Range; Efficiency-seeking Offshoring; General Oligopolistic Equilibrium. (search for similar items in EconPapers)
JEL-codes: F12 F23 L23 (search for similar items in EconPapers)
Date: 2014-06-25
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://epub.ub.uni-muenchen.de/21021/1/EckelIrlacher_2014.pdf (application/pdf)

Related works:
Journal Article: Multi-product offshoring (2017)
Working Paper: Multi-product Offshoring (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:21021

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