Handbook of International Trade and Transportation
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Handbook of International Trade and Transportation

Edited by Bruce A. Blonigen and Wesley W. Wilson

International trade has grown rapidly over the past half century, accommodated by the transportation industry through concomitant growth and technological change. But while the connection between transport and trade flows is clear, the academic literature often looks at these two issues separately. This Handbook is unique in pulling together the key insights of each field while highlighting what we know about their intersection and ideas for future research in this relatively unexamined but growing area of study.
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Chapter 7: Offshoring and transport costs

Holger Görg and Aoife Hanley

Abstract

In this chapter the authors examine the link between transport costs and offshoring activity. They first discuss the measurement of offshoring and use aggregate data to describe recent developments. They then look at some theoretical contributions that consider the implications of transport costs for offshoring, and introduce the view that transport and other services are necessary to connect production stages located in different countries. The chapter then looks at more formal models that deal with the choice of how to organize production, where transport involves variable costs. The authors start with the choice between exporting and horizontal or vertical FDI, as well as models with more ‘complex’ internationalization strategies. They then examine the implications of offshoring due to falling transport costs for labour market outcomes. Finally, they discuss some empirical evidence on the link between transport and other trade costs for offshoring.

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