ABSTRACT
The past two decades have seen a spectacular growth in outsourcing activities in the world economy. Several studies have documented this trend and provided important implications for trade (see, for example, Abraham and Taylor 1996; Campa and Goldberg 1997; Hummels, Rapoport and Yi 1998; Feenstra and Hanson 1999). Although it is not at all a new phenomenon (Domberger 1998), outsourcing has become a buzzword to characterize the world economy as one of closer integration of trade but greater disintegration of production (Feenstra 1998).
