American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Production Clustering and Offshoring
American Economic Journal: Microeconomics
vol. 14,
no. 3, August 2022
(pp. 700–732)
Abstract
I introduce a model of international production that allows the production chain to be of any length or number of sourcing countries and in which the production process does not have to be perfectly sequential. The presence of trade costs in this model makes firms cluster their production geographically, while trade liberalization allows firms to fragment their production more. Clustering patterns depend on the characteristics of the production structure, with stronger clustering associated with longer and less connected structures. Clustering intensity in upstream stages of production is generally higher and less affected by exogenous changes in production structure.Citation
Tyazhelnikov, Vladimir. 2022. "Production Clustering and Offshoring." American Economic Journal: Microeconomics, 14 (3): 700–732. DOI: 10.1257/mic.20190232Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- F12 Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 Empirical Studies of Trade
- F23 Multinational Firms; International Business
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L23 Organization of Production
- L24 Contracting Out; Joint Ventures; Technology Licensing
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