The export-magnification effect of offshoring

Joern Kleinert () and Nico Zorell

No 330, Tübinger Diskussionsbeiträge from University of Tübingen, School of Business and Economics

Abstract: In this paper we argue that the surge in world trade over the two decades preceding the global downturn of 2008-09 can be partly explained by the export-magnification effect of offshoring. In a general equilibrium model with heterogeneous firms we show analytically that a fall in variable offshoring costs boosts trade in differentiated final goods through an intra-industry reallocation of resources towards the more productive firms. More specifically, lower barriers to offshoring reduce the input costs of incumbent offshoring firms and allow more firms to source cheap foreign intermediates, which improves firm-level price competitiveness. This, in turn, translates into higher export quantities of incumbent exporters (intensive margin) and entry of new exporters (extensive margin), thereby fostering trade in final goods.

Keywords: Offshoring; trade; multinational firms (search for similar items in EconPapers)
JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/45809/1/662162498.pdf (application/pdf)

Related works:
Working Paper: The export-magnification effect of offshoring (2012)
Working Paper: Export-Magnification Effect of Offshoring (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuedps:330

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