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On the relationship between international outsourcing and price-cost margins in European industries


Egger, H; Egger, P (2004). On the relationship between international outsourcing and price-cost margins in European industries. Review of Industrial Organization, 25(1):45-69.

Abstract

This paper sets up a model, where multinationals compete in quantities and domestic firms form a competitive fringe. Within this framework, we analyse the relationship between market concentration, international outsourcing and the industry price-cost margin. The empirical results of a panel of 66 industries and the EU12 countries in the 1990s strongly confirm our theoretical hypotheses. Market concentration and international outsourcing are positively related to industry price–cost margins. In a thought experiment, we show that industry price–cost margins would have decreased by 0.4 percentage points more in the 1990s, if international outsourcing had not changed since 1990. In addition, international outsourcing accounts for a convergence in margins across industries in the last decade.

This paper sets up a model, where multinationals compete in quantities and domestic firms form a competitive fringe. Within this framework, we analyse the relationship between market concentration, international outsourcing and the industry price-cost margin. The empirical results of a panel of 66 industries and the EU12 countries in the 1990s strongly confirm our theoretical hypotheses. Market concentration and international outsourcing are positively related to industry price–cost margins. In a thought experiment, we show that industry price–cost margins would have decreased by 0.4 percentage points more in the 1990s, if international outsourcing had not changed since 1990. In addition, international outsourcing accounts for a convergence in margins across industries in the last decade.

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4 citations in Web of Science®
5 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2004
Deposited On:30 Apr 2008 08:58
Last Modified:05 Apr 2016 12:23
Publisher:Springer
ISSN:0889-938X
Additional Information:The original publication is available at www.springerlink.com
Publisher DOI:10.1023/B:REIO.0000040475.20301.e5
Permanent URL: http://doi.org/10.5167/uzh-2448

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