Discussion Paper Details

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Title: Multi-product Offshoring

Author(s): Carsten Eckel and Michael Irlacher

Publication Date: May 2015

Keyword(s): cannibalization effect, efficiency-seeking offshoring, general oligopolistic equilibrium and product range

Programme Area(s): International Trade and Regional Economics

Abstract: We show that the labor market effects of product line relocations within multi-product firms differ significantly from the relocation of production tasks within single-product firms. By incorporating offshoring of labor-intensive goods in a model with multi-product firms, and exploring its implications in partial and general equilibrium, we identify the cannibalization effect of offshoring as an important transmission mechanism within multi-product firms and show that this effect hits domestic labor demand in addition to the well-known relocation effect. Furthermore, we contribute to the growing literature on multi-product firms and trade by showing that lower offshoring costs tend to increase the range of products produced.

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Bibliographic Reference

Eckel, C and Irlacher, M. 2015. 'Multi-product Offshoring'. London, Centre for Economic Policy Research.