NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

International Trade, Offshoring and Heterogeneous Firms

Richard Baldwin, Toshihiro Okubo

NBER Working Paper No. 16660
Issued in January 2011
NBER Program(s):   ITI

Recent trade models determine the equilibrium distribution of firm-level efficiency endogenously and show that freer trade shifts the distribution towards higher average productivity due to entry and exit of firms. These models ignore the possibility that freer trade also alters the firm-size distribution via international firm migration (offshoring); firms must, by assumption, produce in their ’birth nation.’ We show that when firms are allowed to switch locations, new productivity effects arise. Freer trade induces the most efficient small-nation firms to move to the large nation. The big country gets an ‘extra helping’ of the most efficient firms while the small nation’s firm-size distribution is truncated on both ends. This reinforces the big-nation productivity gain while reducing or even reversing the small-nation productivity gain. The small nation is nevertheless better off allowing firm migration.

download in pdf format
   (210 K)

email paper

This paper is available as PDF (210 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16660

Users who downloaded this paper also downloaded these:
Baldwin w17716 Trade And Industrialisation After Globalisation’s 2nd Unbundling: How Building And Joining A Supply Chain Are Different And Why It Matters
Baldwin and Venables w16611 Spiders and snakes: offshoring and agglomeration in the global economy
Baldwin and robert-nicoud w15882 Trade-in-goods and trade-in-tasks: An Integrating Framework
Bloom, Draca, and Van Reenen w16717 Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity
Bernard, Jensen, Redding, and Schott w17627 The Empirics of Firm Heterogeneity and International Trade
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us