GEP Research Paper 09/16
International Trade and Local Organization of Production - Two Elementary Propositions
Sugata Marjit
Summary
This paper shows that with trade liberalization, the export sector in a labour abundant country is likely to outsource locally more than the import competing sector.
Abstract
This paper argues that international trade should affect local organization of production in a systematic way. By using the standard Heckscher-Ohlin-Samuelson model we show that the export sector is more likely to demonstrate fragmentation, entrepreneurship and outsourcing compared to the import-competing sector in a typical labor abundant country. Liberal trade regime will promote entrepreneurship in general. This is the first elementary proposition. Local outsourcing also establishes a clear link between trade and productivity. This is the second elementary proposition.
Issued in July 2009
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