Trade liberalization, outsourcing, and firm productivity

Ossa, Ralph (2007) Trade liberalization, outsourcing, and firm productivity. CEPDP (814). London School of Economics and Political Science. Centre for Economic Performance, London, UK. ISBN 9780853280408

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Abstract

Empirical evidence suggests that trade liberalization increases firm productivity. This paper offers a novel explanation for this finding. I develop a simple general equilibrium model of trade in which trade liberalization leads to outsourcing as firms focus on their core competencies in response to tougher competition. Since firms are the better at performing tasks the closer they are to their core competencies, this outsourcing increases firm productivity. Moreover, I also investigate the links between various technological parameters and outsourcing. In particular, I analyze how technological progress, changes in fixed costs, and changes in internal governance costs affect firms’ integration decisions.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2007 Ralph Ossa
Divisions:	Centre for Economic Performance Economics
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HD Industries. Land use. Labor
JEL classification:	F - International Economics > F1 - Trade > F10 - General L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure: Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
Date Deposited:	19 Jul 2008 13:40
Last Modified:	13 Sep 2024 20:03
URI:	http://eprints.lse.ac.uk/id/eprint/19698

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