Offshoring and Reshoring: The Roles of Incomplete Contracts and Relative Bargaining Power

Ngo Van Long; Maxwell Tuuli

doi:10.3868/s060-007-018-0004-4

Front. Econ. China ›› 2018, Vol. 13 ›› Issue (1) :32 -51. DOI: 10.3868/s060-007-018-0004-4

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Offshoring and Reshoring: The Roles of Incomplete Contracts and Relative Bargaining Power

Ngo Van Long ¹
, Maxwell Tuuli ²

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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.

Keywords

incomplete contracts / bargaining power / offshoring / reshoring

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Ngo Van Long, Maxwell Tuuli. Offshoring and Reshoring: The Roles of Incomplete Contracts and Relative Bargaining Power. Front. Econ. China, 2018, 13(1): 32-51 DOI:10.3868/s060-007-018-0004-4