Incomplete Contracts and the Welfare Impact of Globalization
Defever, Fabrice; Andres, Frédéric (2007), Incomplete Contracts and the Welfare Impact of Globalization, European Economic Association & Econometric Society : Parallel Meetings, 2007-08, Budapest, Hongrie
Type
Communication / ConférenceDate
2007Conference title
European Economic Association & Econometric Society : Parallel MeetingsConference date
2007-08Conference city
BudapestConference country
HongrieMetadata
Show full item recordAbstract (EN)
We embed an incomplete contracts setting into a model of economic geography with heterogeneous firms whose process of production can be geographically separated. Because of the presence of international incomplete contracts, trade liberalization is not necessarily welfare-enhancing. We show that firms that use a large share of the low-tech input relocate first, using outsourcing. Then, more technological firms start to relocate also, but integrating their supplier. We argue that this change in the organizational structure of firms increases the speed of Southern industrialization, but, it might be detrimental to workers’ welfare in both countries.Subjects / Keywords
Welfare; Incomplete Contracts; Economic Geography; Interrogeables firmsRelated items
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