ECON 101 Lecture 8: Lecture 08 - Intermediate Goods Trade and Offshoring
Document Summary
Lecture 08 - intermediate goods trade and offshoring. Back in the old days (which are what we have been looking out), we make a good from start to finish domestically, and then we export that good. International integration of production: international integration of production: trade across borders but among contractually linked firms or within multinational firms, international integration of production could also be called international. Cross-border outsourcing (across firm boundaries), offshoring (within or across firm boundaries) Intermediate production steps can be located onshore or offshore. Intermediate production steps can be outsourced or kept in-house. Trade in intermediate and final goods: consider a heckscher-ohlin model. Heckscher-ohlin: industries differ in factor intensities and countries" endowments. Heckscher-ohlin: factors can move costlessly across industries. Virtual migration: factors can be contracted costlessly across countries: under factor price equalization, virtual migration has no effect on factor prices and goods prices, but it changes the location of production.
