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Off-shoring of business services and de-industrialization: threat or opportunity - and for whom?

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  • Robert-Nicoud, Frédéric
Abstract
This paper takes a new look at the issue of overseas sourcing of services. In framework in which comparative advantage is endogenous to agglomeration economies and factor mobility, the fragmentation of production made possible by the new communication technologies and low transportation costs allow global firms (multinational corporations or individual firms active in global networks) to simultaneously reap the benefit of agglomeration economies in OECD countries and of low wages prevailing in countries with an ever better educated labour force like India. Thus, the reduction of employment in some routine tasks in rich countries in a general equilibrium helps sustain and reinforces employment in the core competencies in such countries. That is, the loss of some jobs permits to retain the ‘core competencies’ in the ‘core countries’. The welfare implications of this analysis are shown to be not as straightforward as in a neoclassical world.

Suggested Citation

  • Robert-Nicoud, Frédéric, 2006. "Off-shoring of business services and de-industrialization: threat or opportunity - and for whom?," LSE Research Online Documents on Economics 19847, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:19847
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    Cited by:

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    2. Miren Lafourcade & Jacques-François Thisse, 2008. "New economic geography: A guide to transport analysis," Working Papers halshs-00586878, HAL.
    3. repec:dau:papers:123456789/4070 is not listed on IDEAS
    4. Ho Yeon Kim & Toshitaka Gokan, 2011. "Theories on FDI and the Behavior of MNEs in East Asia," Chapters, in: Masahisa Fujita & Ikuo Kuroiwa & Satoru Kumagai (ed.), The Economics of East Asian Integration, chapter 5, Edward Elgar Publishing.

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    More about this item

    Keywords

    Outsourcing; wage inequality; communication costs;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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