Task Trade between Similar Countries

By Gene M. Grossman, Esteban Rossi-Hansberg. 2011

181 citations recorded by the source corpus.

The authors propose a theory of task trade between countries that have similar relative factor endowments and technological capabilities 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. The paper discusses the relationship between equilibrium wages, equilibrium outputs, and relative country size and examines how the pattern of specialization reflects the key parameters of the model.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/65588c0876eadb6793b796064a952b31ddb7d9f2

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Citations in the corpus

Organizations and Trade (2009, background): “Grossman and Rossi-Hansberg (2008a) avoid this by assuming that production requires a continuum of tasks from each factor of production.”
Offshoring and Directed Technical Change (2015, unknown): “Note that equation (40) allows us to reduce the number of state variables in the dynamic system to one.”
Functional specialisation in trade (2018, background): “Belderbos et al. (2016) provides a 16 Grossman and Rossi-Hansberg (2012) provide a general equilibrium model with countries that have similar relative factor endowments but vary in size, and hence in associated local spillovers of production.”