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Trading Tasks: A Simple Theory of Offshoring
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| Venue: | American Economic Review |
| Citations: | 168 - 3 self |
BibTeX
@ARTICLE{Grossman_tradingtasks:,
author = {M. Grossman and Esteban Rossi-hansberg},
title = {Trading Tasks: A Simple Theory of Offshoring},
journal = {American Economic Review},
year = {},
pages = {1978--1997}
}
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Abstract
We propose a theory of the global production process that focuses on tradeable tasks, and use it to study how falling costs of offshoring affect factor prices in the source country. We identify a productivity effect of task trade that benefits the factor whose tasks are more easily moved offshore. In the light of this effect, reductions in the cost of trading tasks can generate shared gains for all domestic factors, in contrast to the distributional conflict that typically results from reductions in the cost of trading goods. (JEL F11, F16) The nature of international trade is changing. For centuries, trade mostly entailed an exchange of goods. Now it increasingly involves bits of value being added in many different locations, or what might be called trade in tasks. Revolutionary advances in transportation and communications technology have weakened the link between labor specialization and geographic concentration, making it increasingly viable to separate tasks in time and space. When instructions can be delivered instantaneously, components and unfinished goods can be moved quickly and cheaply, and the output of many tasks can be conveyed electronically, firms can take advantage of factor cost disparities in different countries without sacrificing the gains from specialization. The result
Keyphrases
trading task simple theory affect factor price shared gain communication technology tradeable task different country labor specialization revolutionary advance task trade unfinished good domestic factor geographic concentration many different location distributional conflict source country trading good many task productivity effect international trade global production process factor cost disparity jel f11
