Does Demand Uncertainty Influence Location of Industry?

TitleDoes Demand Uncertainty Influence Location of Industry?
Publication TypeJournal Article
AuthorsBaniak, A., J. Cukrowski, and S. Dunin-Wasowicz
Journal titleEconomia Internazionale/International Economics
Year2006
Pages419 - 437
Volume59
Issue4
Abstract

The analysis presented in this paper shows that in countries with relatively high wages risk-averse firms operating in perfectly competitive markets will reduce production of commodities with high uncertainty of demand. Such commodities will be produced mainly in countries having sufficiently lower labor costs. Thus, an increase in demand uncertainty may shift the production from developed to developing countries even though additional per unit transaction and transportation costs in the latter offset the advantage of lower wages. The predictions of the model are then checked through an analysis of the toy industry concerning the level of demand uncertainty and location of outsourced production activities.

Languageeng
Notes

Does Demand Uncertainty Influence Location of Industry?; Using Smart Source Parsing no. November pp

Unit: 
Department of Economics and Business