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American Economic Journal: Macroeconomics: Vol. 2 No. 2 (April 2010)

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Offshoring in a Ricardian World

Article Citation

Rodríguez-Clare, Andrés. 2010. "Offshoring in a Ricardian World." American Economic Journal: Macroeconomics, 2(2): 227-58.

DOI: 10.1257/mac.2.2.227

Abstract

This paper proposes a Ricardian model to understand the short-run and long-run aggregate effects of increased fragmentation and offshoring on rich and poor countries. The short-run analysis shows that, when offshoring is sufficiently high, further increases in offshoring benefit the poor country and hurt the rich country. But these effects may be reversed in the long run as countries adjust their research efforts in response to increased offshoring. In particular, in the long run, the rich country always gains from increased offshoring, whereas poor countries see their static gains partially eroded by a decline in their research efforts. (JEL F12, F23, L24, M16)

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Authors

Rodríguez-Clare, Andrés (PA State U)

JEL Classifications

F12: Models of Trade with Imperfect Competition and Scale Economies
F23: Multinational Firms; International Business
L24: Contracting Out; Joint Ventures; Technology Licensing
M16: International Business Administration

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