Temporary shocks and offshoring: The role of external economies and firm heterogeneity

摘要: We construct a model of offshoring with externalities and firm heterogeneity. Due to the presence externalities, temporary shocks like Y2K problem can have permanent effects, i.e., they permanently raise extent in an industry. Also, initial advantage country as potential host for outsourcing activities create lock effect, whereby late movers comparative disadvantage. Furthermore, existence heterogeneity along help explain dynamic process offshoring, where most productive firms offshore first others follow later. Finally, we work out some unexpected welfare implications which show that net industry profits be lower equilibrium than regime no outsourcing. Consumer rises, under fairly plausible conditions this effect offset negative impact on profits.