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Offshoring along the production chain

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image for OpenScout resource :: Offshoring along the production chain

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Recent contributions on offshoring often assume that firms can freely split their production process into separate steps which can be ranked according to the cost savings from producing abroad. We replace this assumption by the notion of a technologically determined sequence of production steps. In our model, cost savings from offshoring fluctuate along the production chain, and moving unfinished goods across borders causes transport costs. We show that, in such a setting, firms may refrain from offshoring even if relocating individual steps would be advantageous. Conversely, small variations in model parameters may lead to a large increase in offshoring activities.

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Philipp Harms, Jens Oliver Lorz, Dieter M. Urban

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Adapt according to the presented license agreement and reference the original author.