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Task Trade between Similar Countries (2010)
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BibTeX
@MISC{Grossman10tasktrade,
author = {Gene M. Grossman and Esteban Rossi-hansberg},
title = {Task Trade between Similar Countries},
year = {2010}
}
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Abstract
We propose a theory of task trade between countries that have similar relative factor endowments but may di¤er in size. Firms produce di¤erentiated goods by performing a continuum of tasks, each of which generates local spillovers. Tasks can be performed at home or abroad, but o¤shoring entails costs that vary by task. In equilibrium, the tasks with the highest o¤shoring costs may not be traded. Among the remainder, those with the relatively higher o¤shoring costs are performed in the country that has the higher wage and higher aggregate output. We discuss the relationship between equilibrium wages, equilibrium outputs, and relative country size and examine how the pattern of specialization re‡ects the key parameters of the model.
