Consider an Offshoring Model of Reverse FDI in Which

question 60

Essay

Consider an offshoring model of reverse FDI in which
Foreign's offshore skilled labor activities to Home
because Home's skilled labor has a lower relative wage
than Foreign's skilled labor.Also assume that the costs
of capital and trade are uniform across production
activities.
A) Will Foreign's offshored production activities be high
or low on the value chain for a given product?
B) Suppose that Foreign uniformly increases its tariff
level, effectively increasing the cost of importing all
goods and services from abroad.How does this affect
the slicing of the value chain?

• A) Will Foreign's offshored production activities be high
• or low on the value chain for a given product?
• B) Suppose that Foreign uniformly increases its tariff
• level, effectively increasing the cost of importing all
• goods and services from abroad.How does this affect
• the slicing of the value chain?

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