Research keywords: trade, offshoring, fragmentation, technology transfer, price dispersion, firm heterogeneity, firm productivity
Offshoring in a one factor world: it’s DFS all over again!, May 2015 – under review Journal of International Economics
Technology Transfer and North-South Trade, September 2015 – forthcoming Review of International Economics
Ethnic Networks and Price Disperson, with M.
Anderson and S. Smith, October 2015 – resubmitted Review of
Paper (PDF), Abstract (HTML)
Offshoring and North-South Trade with
Paper (PDF), Abstract (HTML)
Firm Heterogeneity and Export Pricing in India, with M. Anderson, J. Signoret, and S. Smith, August 2015 – under review Journal of International Economics
Offshoring in the H-O-S model: the improbability of a global rise in the skill premium – very preliminary – not to be cited
Paper (PDF), Abstract (HTML), Supplemental Appendix (PDF)
Maple code for
computations in the above papers can be found here.
Offshoring in a one factor world: it’s DFS all over again!
While the theoretical literature on o§shoring is rich and complex, it may be generally summarized as a collection of special cases typiÖed by partial equilibrium (goods or factor prices Öxed), small numbers of goods, exogenously determined margins between o§shored tasks, and Öxed factor coe¢ - cients. Using a Ricardian continuum framework, we present a simple general equilibrium model of o§shoring with fully áexible goods and factor prices, a continuum of goods, endogenously determined margins of o§shoring production and substitutability between stages of production. The model brings structure to the gallery of ambiguous results noted above, and allows focus of the e§ects of o§shoring on prices, wages, production location, and welfare.
JEL Codes: F11 (Neoclassical Models of Trade)
Costless technology transfer is a standard assumption in the international trade literature, however by some estimates the average technology transfer cost is nearly 20% of total project costs (Teece, 1977). This analysis examines the conditions under which the advanced country gains when the transfer of technology from the advanced North to the less advanced South incurs resource costs. Results are derived for the e§ect on production, wages, prices and welfare of lower transmission and absorption costs, and productivity and population shocks. The framework is extended to examine the implications of an improvement in the enforcement of international intellectual property rights.
Ethnic Networks and Price Disperson
(with M. Anderson and S. Smith)
We offer and test a model linking ethnic networks to global price dispersion which predicts lower price dispersion as shared ethnic populations between countries rise, effects that may reverse at higher levels as network discipline breaks down. Using Chinese, Indian and Japanese data, we find that country-pairs linked by the Chinese network have significantly lower mean price dispersion. A one standard deviation increase in the size of the Chinese coethnic network lowers price dispersion by 6 - 33 percent, an effect that reverses as the network gets large. No such evidence exists for the Indian or Japanese networks.
Keywords: price dispersion; ethnic networks; trade costs; Chinese diaspora
JEL Codes: F40, F41
We present a simple general equilibrium model of o§shoring where households have nonhomothetic preferences. This provides a platform from which to examine issues of trade and development in the presence of o§shoring. We show that o§shoring lowers the Southís relative wage making the North unequivocally better o§. In the o§shoring equilibrium the South will consume a smaller set of goods than the North, and may play a part in the production of goods that it does not consume. Faster population growth in the South can cause product cycles, shifting task production from the North to the South and leading the North to consume new goods. Global and Southern uniform productivity improvements can also lead to product cycles. Productivity shocks generally improve welfare in the North and have ambiguous e§ects for the South, however there are exceptions where all countries gain.
We examine the export pricing behavior of Indian manufacturing firms in the early 2000s using a unique data set that matches detailed firm characteristics with product and destination-level trade data. We find, in contrast to evidence for other countries, that firm productivity is negatively associated with export prices, and that export prices are negatively associated with distance, and positively associated with remoteness. We suggest that it is the higher cost of innovation in India, driving down the scope for quality differentiation, which leads to the negative association between productivity and prices. We use the framework of Antoniades (2015) to place our results (heterogeneous goods, homogeneous markets) relative to two other groups identified in the literature: (homogeneous goods, homogeneous markets) and (heterogeneous goods, heterogeneous market). To our knowledge this is the first empirical evidence consistent with this particular theoretical possibility.
Keywords: Firm level data, Pricing, Heterogeneous firms
JEL Codes: F1, F10, F12, F14
Williams School of Commerce, Economics & Politics
Washington and Lee University
Lexington VA 24450-2554
Last updated: August 2015
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