lec08-eco101-11

lec08-eco101-11 - InternationalTrade Lecture8 c ⃝...

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Unformatted text preview: InternationalTrade Lecture8 c ⃝ Marc-AndreasMuendler UniversityofCalifornia,SanDiego October18,2011 8.IntermediateGoodsTradeandOffshoring Econ101, c ⃝ M.Muendler InternationalIntegrationofProduction • InternationalIntegrationofProduction:Tradeacrossbordersbutamong contractuallylinkedfirmsorwithinmultinationalfirms • InternationalIntegrationofProductioncouldalsobecalledInterna- tionalDisintegrationofProduction – “Slicingthevaluechain” (Krugman1996) – “Verticalspecialization” (Hummels,Rapaport,Yi1997) – Cross-border“outsourcing”(acrossfirmboundaries), “offshoring”(withinoracrossfirmboundaries) 8.IntermediateGoodsTradeandOffshoring Econ101, c ⃝ M.Muendler WageInequalityandInternationalTrade • Fourcompetingtheories – Heckscher-Ohlintradetheory:Wagesforthelessskilledwillfall incountriesthatarerelativelyabundantinhighskilledlabor – Offshoring:Tradeofintermediategoodsacrossproductionstages withdifferentfactorintensities – Tradeintasks:Costlyremotecontractingoftasksforsinglepro- ductionstage – Directed(biased)technicalchange:Advancesininformationtech- nologyfavor(complement)highskillsmorethanlowskills 8.IntermediateGoodsTradeandOffshoring Econ101, c ⃝ M.Muendler Offshoring,Outsourcing,MultinationalProduction • Offshoring – Intermediateproductionstepscanbelocatedonshoreoroffshore – Bordersofcountries(today) • Outsourcing – Intermediateproductionstepscanbeoutsourcedorkeptin-house – Boundariesoffirms – Multinationalproductionisin-houseoffshoring(Lecture12) 8.IntermediateGoodsTradeandOffshoring Econ101, c ⃝ M.Muendler TradeinIntermediateandFinalGoods • ConsideraHeckscher-Ohlinmodel. Butallow virtual migrationacrossborders – Heckscher-Ohlin:Industriesdifferinfactorintensitiesandcoun- triesinendowments – Heckscher-Ohlin:Factors can movecostlesslyacrossindustries – Virtualmigration:Factors can becontractedcostlesslyacross countries • Underfactorpriceequalization,virtualmigrationhasnoeffectonfac- torpricesandgoodsprices,butitchangesthelocationofproduction 8.IntermediateGoodsTradeandOffshoring Econ101, c ⃝ M.Muendler RybczynskiTheorem • Theorem. Iftheendowmentofonefactorincreases,thenoutputof theindustrythatintensivelyusesthefactorexpandsandoutputin theotherindustrycontracts.(Factorpricesandgoodspricesremain unchanged.) • Proof. Consider ∆ L> and ∆ T =0 underFreeTrade.underFreeTrade....
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This note was uploaded on 01/30/2012 for the course ECON 101 taught by Professor Jacobson during the Fall '03 term at UCSD.

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lec08-eco101-11 - InternationalTrade Lecture8 c ⃝...

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