Outsourcing Price Decisions: Evidence from U.S. 9802 Imports

Deborah Swenson

NBER Working Paper No. 11184
Issued in March 2005
NBER Program(s):   ITI

This paper studies U.S. overseas assembly imports to identify whether factors related to information or search costs appear to condition outsourcing decisions. The data for 1991-2000 show that U.S. overseas assembly imports were characterized by incomplete pass-through of production and trade costs to import prices, though products assembled in more highly educated countries passed-through a much larger portion of their cost changes. In addition, the price of outsourcing imports responded to competing suppliers' prices, with the largest responses occurring for products in capital-intense industries. These differential price responses suggest that information issues play an important role in the mediation of outsourcing relationships.

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