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Task Trade Between Similar Countries

Author(s): Rossi-Hansberg, Esteban A.; Grossman, Gene M.

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Abstract: We 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 the higher aggregate output. We discuss the relationship between equilibrium wages, equilibrium outputs, and relative country size
Publication Date: 2012
Electronic Publication Date: 2012
Citation: Grossman, G. M. and Rossi‐Hansberg, E. (2012), Task Trade Between Similar Countries. Econometrica, 80: 593-629. doi:10.3982/ECTA8700
DOI: doi:10.3982/ECTA8700
ISSN: 0012-9682
Pages: 593 - 629
Type of Material: Journal Article
Journal/Proceeding Title: Econometrica
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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