A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe

11 Pages Posted: 15 Dec 2005

See all articles by Dalia Marin

Dalia Marin

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Date Written: September 2005

Abstract

Europe is reorganizing its international value chain. I document these changes in Europe's international organization of production with new survey data of Austrian and German firms investing in Eastern Europe. I show estimates of the share of intrafirm trade between Austria or Germany on the one hand and Eastern Europe on the other. Furthermore, I present empirical evidence of the drivers of the new division of labor in Europe. I find among other things that falling trade costs and reduced levels of corruption as well as improvements in the contracting environment in Eastern Europe are affecting the level of intrafirm imports from that region. These factors also favor outsourcing over offshoring. In contrast, low organizational costs of hierarchies and large costs of holdup (when there are no alternative investors in Old Europe or no alternative suppliers in Eastern Europe) favor offshoring over outsourcing. Tax holidays granted by host countries in Eastern Europe also mildly affect the organizational choice.

Keywords: the empirics of global sourcing, intrafirm trade, contract enforcement, comparative advantage in Eastern Europe, empirical test of the theory of the firm

JEL Classification: D23, D51, F11, L14, O11

Suggested Citation

Marin, Dalia, A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe (September 2005). Available at SSRN: https://ssrn.com/abstract=869820 or http://dx.doi.org/10.2139/ssrn.869820

Dalia Marin (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2446 (Phone)
+49 89 2180 6227 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
339
Abstract Views
1,988
Rank
161,564
PlumX Metrics