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Offshoring and Reshoring: The Roles of Incomplete Contracts and Relative Bargaining Power |
Ngo Van Long1( ), Maxwell Tuuli2() |
1. Department of Economics, McGill University, Montreal, Quebec, H3A 2T7, Canada
2. Peter B. Gustavson School of Business, University of Victoria, Victoria, BC V8P 5C2, Canada |
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Abstract This paper demonstrates that an increase in bargaining power of Northern firms relative to that of their Southern contractors can trigger reshoring if the North-South wage differential is moderate, such that only industries with a high share of unskilled labor find outsourcing profitable. However, such an increase in Northern bargaining power can increase offshoring if the wage differential is so high that even industries with a low share of unskilled labor also offshore.
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| Keywords
incomplete contracts
bargaining power
offshoring
reshoring
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Issue Date: 15 March 2018
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