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Incomplete specialization and offshoring across Europe
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SYSNO ASEP 0387068 Document Type V - Research Report R&D Document Type The record was not marked in the RIV Title Incomplete specialization and offshoring across Europe Author(s) Frensch, R. (DE)
Hanousek, Jan (NHU-C) RID
Kočenda, Evžen (NHU-C) RIDIssue data Vienna: FIW, 2012 Series FIW Working Paper Series Series number 91 Number of pages 36 s. Language eng - English Country AT - Austria Keywords international trade ; gravity model ; offshoring Subject RIV AH - Economics R&D Projects GAP403/12/0080 GA ČR - Czech Science Foundation (CSF) Institutional support NHU-C - PRVOUK-P23 Annotation Recent empirical studies have been searching for evidence on and driving forces for offshoring. Frequently, this has been done by analyzing gross trade flows related to offshore activities using gravity equations augmented by ad hoc measures of supply-side country differences. This paper suggests that gravity formulations of this sort are mis-specified, due to theoretically unmotivated attempts to allow for both complete and incomplete specialization influences on gross trade flows within the same gravity framework. We suggest an alternative specification rooted in incomplete specialization that views bilateral gravity equations as statistical relationships constrained on countries’ multilateral specialization patterns. This view reveals that countries’ multilateral specialization incentives drive bilateral trade, corresponding to and competing with the role of multilateral trade resistance. Our results support evidence for offshoring activities across Europe, driven by countries’ multilateral specialization incentives, as expressed by supply-side country differences relative to the rest of the world. Workplace Economics Institute - CERGE Contact Tomáš Pavela, pavela@cerge-ei.cz, Tel.: 224 005 122 Year of Publishing 2013
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