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The Impact of Differential Falls in Offshoring Costs on Welfare

Authors

  • Wanida Ngienthi,

    Corresponding author
    1. Martin de Tours School of Management, Assumption University, Bang Na Trad Rd., Samut Prakan 10540, Thailand
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  • Fumio Dei

    Corresponding author
    1. Graduate School of Business Administration, Kobe University, Rokkodai-cho 2-1, Nada-ku, Kobe 657-8501, Japan
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    • The authors would like to thank Ronald W. Jones, Yunfang Hu, Kenji Kondoh, Yan Ma, Toru Kikuchi, and two anonymous referees for helpful comments. An earlier version of this paper was presented at Second Keio/Kyoto International Conference on Market Quality Economics, at 2009 Pacific Rim Conference of Western Economic Association International, at Fourth Keio/Kyoto International Conference on Market Quality Economics, at Rokko Forum of Kobe University, and at KIER-Pacific Economic Review Workshop on Economics and Economic Policies. Financial support from grant-in-aid for Scientific Research of the Japan Society for the Promotion of Science is gratefully acknowledged.


Ngienthi: Martin de Tours School of Management, Assumption University, Bang Na Trad Rd., Samut Prakan 10540, Thailand. Tel: +66-0-2723-2222; Fax: +66-0-2313-4673; E-mail: wNgienthi@au.edu. Dei: Graduate School of Business Administration, Kobe University, Rokkodai-cho 2-1, Nada-ku, Kobe 657-8501, Japan. Tel: +81-78-803-6939; Fax: +81-78-803-6977; E-mail: dei@kobe-u.ac.jp.

Abstract

We highlight the fact that offshoring firms and local firms that do not offshore coexist in the North. Adopting the O-ring production function approach to offshoring, we demonstrate that a fall in offshoring costs in any sector makes the South better off and that if offshoring costs in a high-technology sector fall at a faster rate, the North is worse off, and vice versa.

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