Information, International Substitutability, and Globalization
American Economic Review
vol. 93,
no. 3, June 2003
(pp. 775-791)
Abstract
Improved information allows home firms to rule out more potential foreign trade partners in advance of attempting to form a match. The increased responsiveness to country wage or goods price differentials resulting from this better first cut causes the general-equilibrium elasticity of substitution between national labor forces or the Armington elasticity of substitution between domestic and imported output to increase. Further results include an increase in the elasticity of domestic labor demand, an increase in the extent to which reductions in conventional trade barriers equalize national wages, and reduced "natural protection" for domestic producers.Citation
Rauch, James, E., and Vitor Trindade. 2003. "Information, International Substitutability, and Globalization ." American Economic Review, 93 (3): 775-791. DOI: 10.1257/000282803322157089JEL Classification
- F16 Trade and Labor Market Interactions
- F13 Trade Policy; International Trade Organizations
- F23 Multinational Firms; International Business
- L24 Contracting Out; Joint Ventures; Technology Licensing