TY  - JOUR
AU  - Grossman,Gene M.
AU  - Rossi-Hansberg,Esteban
TI  - Task Trade between Similar Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14554
PY  - 2008
Y2  - December 2008
UR  - http://www.nber.org/papers/w14554
L1  - http://www.nber.org/papers/w14554.pdf
N1  - Author contact info:
Gene M. Grossman
International Economics Section
Department of Economics
Princeton University
Princeton, NJ 08544
Tel: 609/258-4823
Fax: 609/258-1374
E-Mail: grossman@princeton.edu

Esteban Rossi-Hansberg
Princeton University
Department of Economics
Fisher Hall
Princeton, NJ 08544-1021
Tel: 609/2584024
Fax: 650/725-5702
E-Mail: erossi@princeton.edu
AB  - We propose a theory of task trade between countries that have similar relative factor endowments but may differ in size. Firms produce differentiated goods by performing a continuum of tasks, each of which generates local spillovers. Tasks can be performed at home or abroad, but offshoring entails costs that vary by task. In equilibrium, the tasks with the highest offshoring costs may not be traded. Among the remainder, those with the relatively higher offshoring costs are performed in the country that has the higher wage and higher aggregate output. We discuss the relationship between equilibrium wages, equilibrium outputs, and relative country size and examine how the pattern of specialization reflects the key parameters of the model.
ER  -