N° 2005-09 Juin 2005 Guillaume Daudin* Jean-Luc Gaffard ...
N° 2005-09 Juin 2005 Guillaume Daudin* Jean-Luc Gaffard ... N° 2005-09 Juin 2005 Guillaume Daudin* Jean-Luc Gaffard ...
IV. RELOCATION: WHAT MATTERS? COMPETITION OR/ANDA NEW POLICY MIX♠Jean-Luc Gaffard* and Michel Quéré**With respect to relocation (delocalisation) issues two attitudes can be contrasted.According to the most standard one, relocation does not create any problem when fullcompetition prevails in product, labour, and capital markets. Changes in transportation andproduction costs may generate changes in location by firms in manufacturing industry at thebenefit of less developed countries. In more developed countries, jobs are shifting from e.g.manufacturing to services industry, and the negative impact on households’ purchasingpower of lower nominal wages, if any, will be more than offset by lower prices of importedfinal goods. Unemployment will be frictional and temporary, unless market labour rigiditiesprevent the necessary jobs’ shifting. According to an evolutionary perspective, relocation isan aspect of a process of creative destruction that necessarily results in local distortions inthe structure of productive capacity and hence in market disequilibria. In the latterperspective, relocation can no longer be viewed as an equilibrium phenomenon. It may beassociated with an increasing rate of unemployment and make it necessary for publicauthorities to intervene. In fact, all depends on the way co-ordination issues are dealt with.Focusing on attractiveness and competitiveness of territories may lead public authorities toimplicitly consider international trade as a zero (or negative) sum game and implementsupply side oriented policies that are fundamentally misconceived and could increase marketdisequilibria. Thus it is necessary to consider how production location really takes place outof equilibrium and how relocation may end in a quasi-dynamic equilibrium. Publicinterventions are required, which consist in combining structural and macroeconomicpolicies, the former being efficient only if the latter are growth oriented.♠ This provisional paper has been written in relation with the preparation of the Special Policy Issue – EFNReport Spring 2005 on ‘The Impact of Relocation and Outsourcing’, and of the 2 nd Euroframe Conference onEconomic Policy Issues in the European Union ‘Trade, FDI, and relocation: challenges for employment andgrowth in the European Union?, to be held in Vienna, June 3, 2005. Though with the usual caveats, we thank G.Gelauff, C. Mathieu, F. Saraceno and H. Sterdyniak for their helpful comments on a previous version.* University of Nice Sophia Antipolis, Institut Universitaire de France, and OFCE-DRIC.** CNRS-GREDEG and OFCE-DRIC.62
Relocation: What Matters? Competition or/and a New Policy Mix1. IntroductionChange in firms’ location is a permanent phenomenon strongly related to anystructural change. Today in developed countries it involves jobs’ destruction, not only in themanufacturing sectors stricto sensu, but also in value-added services to industry. Thisphenomenon becomes really worrying when it takes place in economies also characterised bydecelerating productivity gains, a low job creation, and unemployment. In such a context,relocation is wrongly but usually perceived as one of the ultimate causes of unemployment.And the usual suspect is international trade coupled with huge differences in social andenvironmental standards.However, while tenants of the latter assertion plead for some protection arguments,tenants of liberal orthodoxy maintain that implementing competition rules will prevent anyproblem to occur.We intend to show that things are much more complex. On the one hand, internationaltrade cannot be considered as responsible of increasing unemployment and reducing incomein any country: in an equilibrium context, it cannot be but a positive sum game. Importingnew goods and services that results from relocation creates new opportunities (allows usingproductive resources in a different and more productive way) inside the country. The loss ofmanufacturing jobs due to growing import penetration should be offset by the job creationeffect of growing exports Moreover, as underlined by Krugman (1995), trade surplus is notnecessarily a sign of economic strength when foreigners are reluctant to lend to the country orto invest in it. On the other hand, although international (or interregional) trade is a majorcontribution to growth both in developed and developing countries it is also responsible forsome of the social and distributional costs. “Why? Because trade can generate sizable benefitsonly by restructuring economies – that is the essence of specialization according tocomparative advantage – and in the real world restructuring does not happen without someonebearing costs. The flip side of the gains from trade is the losses that have to be incurred byadversely affected workers and enterprises (…) Simply put: no pain, no gain. It makes littlesense to pretend otherwise” (Rodrik 1998 p. 5). Growth is not a regular process, and as suchits relation with trade is far from being trivial. Changes in the geographical distribution ofeconomic activities, which are in the nature of the growth process, may go hand-to-hand withinternal distortions in the structure of productive capacity that cannot be eliminated by simplyliberalising trade and allowing the economy to be as near as possible to a state of perfectcompetition. As a matter of fact, changes in firms’ location, e.g. at the detriment of advanced63
- Page 11 and 12: Guillaume Daudin and Sandrine Levas
- Page 13 and 14: Guillaume Daudin and Sandrine Levas
- Page 15 and 16: Guillaume Daudin and Sandrine Levas
- Page 17 and 18: Guillaume Daudin and Sandrine Levas
- Page 19 and 20: Guillaume Daudin and Sandrine Levas
- Page 21 and 22: Guillaume Daudin and Sandrine Levas
- Page 23 and 24: Guillaume Daudin and Sandrine Levas
- Page 25 and 26: Guillaume Daudin and Sandrine Levas
- Page 27 and 28: II. OFFSHORE OUTSOURCING IN THE EU
- Page 29 and 30: Georges PujalsConcerning Europe, th
- Page 31 and 32: Georges Pujalsable to reduce costs)
- Page 33 and 34: Georges Pujals“Offshoring” - th
- Page 35 and 36: Georges Pujalsthe number of electro
- Page 37 and 38: Georges PujalsTable 3. Financial se
- Page 39 and 40: Georges PujalsOffshoring was initia
- Page 41 and 42: Georges PujalsChart 8. Relative imp
- Page 43 and 44: Georges PujalsAll those categories
- Page 45 and 46: Georges PujalsChart 11. Supervisors
- Page 47 and 48: Georges Pujalsoutsourcing should th
- Page 49 and 50: Georges PujalsMcKinsey Global Insti
- Page 51 and 52: International Relocation and Deindu
- Page 53 and 54: International Relocation and Deindu
- Page 55 and 56: International Relocation and Deindu
- Page 57 and 58: International Relocation and Deindu
- Page 59 and 60: International Relocation and Deindu
- Page 61: International Relocation and Deindu
- Page 65 and 66: Relocation: What Matters? Competiti
- Page 67 and 68: Relocation: What Matters? Competiti
- Page 69 and 70: Relocation: What Matters? Competiti
- Page 71 and 72: Relocation: What Matters? Competiti
- Page 73: Relocation: What Matters? Competiti
- Page 78: Jean-Luc Gaffard and Michel Quéré
IV. RELOCATION: WHAT MATTERS? COMPETITION OR/ANDA NEW POLICY MIX♠<strong>Jean</strong>-<strong>Luc</strong> <strong>Gaffard</strong>* and Michel Quéré**With respect to relocation (delocalisation) issues two attitudes can be contrasted.According to the most standard one, relocation does not create any problem when fullcompetition prevails in product, labour, and capital markets. Changes in transportation andproduction costs may generate changes in location by firms in manufacturing industry at thebenefit of less developed countries. In more developed countries, jobs are shifting from e.g.manufacturing to services industry, and the negative impact on households’ purchasingpower of lower nominal wages, if any, will be more than offset by lower prices of importedfinal goods. Unemployment will be frictional and temporary, unless market labour rigiditiesprevent the necessary jobs’ shifting. According to an evolutionary perspective, relocation isan aspect of a process of creative destruction that necessarily results in local distortions inthe structure of productive capacity and hence in market disequilibria. In the latterperspective, relocation can no longer be viewed as an equilibrium phenomenon. It may beassociated with an increasing rate of unemployment and make it necessary for publicauthorities to intervene. In fact, all depends on the way co-ordination issues are dealt with.Focusing on attractiveness and competitiveness of territories may lead public authorities toimplicitly consider international trade as a zero (or negative) sum game and implementsupply side oriented policies that are fundamentally misconceived and could increase marketdisequilibria. Thus it is necessary to consider how production location really takes place outof equilibrium and how relocation may end in a quasi-dynamic equilibrium. Publicinterventions are required, which consist in combining structural and macroeconomicpolicies, the former being efficient only if the latter are growth oriented.♠ This provisional paper has been written in relation with the preparation of the Special Policy Issue – EFNReport Spring <strong>2005</strong> on ‘The Impact of Relocation and Outsourcing’, and of the 2 nd Euroframe Conference onEconomic Policy Issues in the European Union ‘Trade, FDI, and relocation: challenges for employment andgrowth in the European Union?, to be held in Vienna, June 3, <strong>2005</strong>. Though with the usual caveats, we thank G.Gelauff, C. Mathieu, F. Saraceno and H. Sterdyniak for their helpful comments on a previous version.* University of Nice Sophia Antipolis, Institut Universitaire de France, and OFCE-DRIC.** CNRS-GREDEG and OFCE-DRIC.62
Change language