Why trucks jump: Offshoring and product characteristics

• 成果类型: Article
• 署名作者: McCalman, Phillip; Spearot, Alan
• 署名单位: University of Melbourne; University of California System; University of California Santa Cruz
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2013.05.004
• 发表日期: 2013
• 页码: 82-95
• 关键词: Intra-industry trade; Offshoring; trade liberalization; QUALITY

摘要

In this paper, we study the role of vertical product differentiation in the decision to allocate production between domestic and foreign plants. To do so, we examine the first wave of light-truck offshoring to Mexico that occurred due to substantially lower post-NAFTA trade barriers and a coincident increase in US demand for light trucks. In contrast to the typical assumption, but similar to many other industries, the need for additional capacity was accommodated by investment in both the US and Mexico for the same models of light trucks. Using a new dataset that details the extent of offshoring and domestic production within models, we document sharp differences in how capacity was utilized. Specifically, within models, we find that automakers offshored varieties which tend to be older in design vintage, lower scale, and less complex to produce. In contrast, we find that varieties inshored to newer capacity in the US exhibit the opposite characteristics. This highlights the important role of vertical differentiation and the associated variation in production complexity for the sorting of production across borders. A product with a large degree of vertical differentiation may provide scope for a firm to maximize profits by inshoring the more complex varieties while offshoring the less complex versions. (C) 2013 Elsevier B.V. All rights reserved.