DP13422 International Relocation of Production and Growth

Author(s): Francisco Alcal√°, Marta Solaz
Publication Date: December 2018
Keyword(s): Globalization, growth, offshoring, product shocks, Trade
JEL(s): F43, F62, O47
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13422

The relocation of production and exports from the North to the South has been a central feature of economic globalization. Using data on approximately 5,000 products, this paper describes this process over the 1996-2014 period and assesses its impact on cross-country growth. Although increased competition from lower income countries tended to have a significant negative effect on the previous exporting countries of the relocated products, most rich countries were able to upgrade their export baskets and avoid a negative aggregate impact. A one-standard negative deviation in a country's export relocation index tended to reduce the country's annual growth by 0.3 percentage points at the median country income but had zero impact at the top of the country income distribution. Medium and low income countries were the most negatively affected by the increased competition from their pair countries.