Wednesday, February 23, 2011

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International Relocation: A short approach to the specialized economic literature

short term, closure of business in a country and its transfer to other countries causes a reduction of productive jobs and the economy suffering that offshoring and, in parallel, a increase in output and employment in the country in which they relocate. This statement summarizes the consensus of experts on the effects of DI. From this basic idea prevailing differences that are specified in a variety of positions and arguments (3).

As several authors argue (Myro and Labrador, 2008), the DI can drive in the country of origin to a new production specialization medium term, involving the emergence or growth of jobs and activities to compensate in terms of quantity and more quality losses. The positive effects of the DI would be, in this view, similar to those resulting from globalization, opening domestic markets to international competition and changes in productive specialization. The disappearance of old comparative advantage and the emergence of new ones or affirmation, in the economies of origin and destination of offshored processes, the consequences would be essential for DI. Most authors argue that ID is an inevitable event, as companies seeking survive facing offshoring strategies to reduce costs and increase their capacity for expansion, they also represent a phenomenon which is unambiguously positive that it encourages each national economy to specialize in those activities for which it has advantages, increase the efficient use of available resources and, therefore, raise real income levels and welfare of its citizens.

With a different direction, other authors emphasize that the ultimate effects on activity, employment and welfare are fraught with uncertainty. They argue that the DI does not end necessarily positive-sum results, therefore, not all economies involved in these processes will further and strengthen in the long run (Flores and Luengo, 2008). The relative levels of development attained by each national economy and the quality of outsourced process management foster or hinder the benefits and potential risks that are necessarily related to the DI process.

Among the factors that ultimately determine the benefits and achievements reached through DI may be mentioned the skills achieved by each national economy, the procedures and specific forms of relocation that is conducive to (direct investment, outsourcing and trade) policies and strategies development and economic growth are applied and their degree of compliance with the conditions (and constraints) that have the economies involved. These factors, among others, are those who decide to what extent the potential negative impacts of offshoring will eventually nullify or overcome the positive effects. Under this approach, the DI is not conducive to all participants in the same way or in the same sense, it can cause lasting damage very harmful for participants with lower levels of development and creates contradictory effects in the long term is very unevenly distributed and the balance of which will depend, especially in low-wage countries that are their preferred destination, for good or mismanagement that made the national authorities and their ability to decide for itself the levels and patterns of openness to these processes that best conformed to their particular conditions and needs.

Another way of approaching the analysis of the impact of DI is to list all the positive and negative effects on production, income, wages and employment in developed countries because the DI to emerging countries without trying predetermining a favorable or unfavorable overall balance (Artus, 2007). The end result concrete and particular to each economy will depend on further analysis to quantify the extent to which domestic intermediate inputs have been replaced by imported inputs. In principle, if such replacement is kept low to moderate positive effects predominate supply, and that the decline in industrial commodity prices and rising real wages of skilled workers to keep their jobs would lead to an increase welfare. If, however, the degree of substitution was very intense, the ending balance could be positive or negative depending on whether the lower prices of imported goods could offset the significant loss of income (due to increased payments for imports intermediate inputs) and the reduction of jobs and businesses suffer domestic sectors before producing the goods that pass to be imported.

In any case, disagreements among experts about the effects of DI are relevant and relate to many different fields.

can not be denied, however, that specializes in the economics literature have prevailed (before, at least, from the deep recession caused by the last and deepest global financial crisis), the authors who are inclined to highlight the positive effects of supply and benefits generated by the DI on increasing productivity, reducing costs, lower prices and specialization in goods and productive activities in which companies are more efficient (Grossman and Rossi-Hansberg, 2006, Mitra and Ranjan, 2007). Should be noted, however, that most experts say that in the short term may unsettle DI of great importance, especially in economies where labor markets are not flexible enough.

Although not mainstream, nor can they be branded as the arguments completely marginal pro-DI is supported by an ultra-liberal ideology that is supported by a wide circle of scholars and powerful institutions (such as the Cato Institute, a think tank based in Washington) that produce an abundant and continuous propaganda in favor of DI. According to the ultra-liberal views, is the dynamics of the capitalist system that causes the mobilization of human resources among sectors and countries to others and, where appropriate, short-term unemployment. This strike is not considered a problem, but as a natural, inevitable and positive functioning of market economies that aims to maintain its flexibility and adaptability. Companies need to permanently increase its eficiciencia and DI is one of the tools they use to be more efficient and lay the groundwork for later create new jobs. There is, therefore, no long-term causal relationship between increasing DI and unemployment, as new and better jobs will be created later. And if those jobs are not created, the problem or causes should not be sought in the DI but the lack of flexibility of the labor market and excessive government regulation and intervention (Arguedas and Valerio, 2004).

The Liberal conceptions, the short-term problems that can cause DI in certain sectors and localities have only one acceptable solution: ensure the principles of free enterprise, open markets and limited government, as individuals, when making their own choices in free markets, are more efficient than when they are encouraged or pressured by public interventions. Ultimately, the only public policy that considered acceptable is designed to encourage individuals to develop new skills to use in other activities. Unemployment caused by the ID is not in the most extreme liberal views, not an economic problem or a social problem is simply an individual problem to be solved each person making their own decisions to increase their employability.

in positions far from the ultra-liberal ideology, can be a wide variety of arguments against a little far and forced integration of less developed economies in the world market (DI processes are a component and a tool that integration), considering that its effects could be very negative if they were to weaken the political capacity of states to implement national strategies for economic development and to freely determine the level, intensity and pace of their international openness and integration into world markets. These positions are a minority in academic circles, but have a very significant presence in the political reality and practice, with many nuances and variations, are developing some of the emerging countries that have achieved greater success in their development strategies and integration world markets. Nevertheless, some renowned authors can fit into this current economic thinking in general, advocates the desirability of greater influence of developing countries in managing globalization and the need for advanced countries to recognize the least developed countries own space or policy-making capacity to adapt global trade rules to the realities and economic policies (Rodrik, 2007). That decision-making autonomy or self enable developing countries to implement trade and industrial policies that need to restructure and diversify their economies and create conditions to boost growth (Rodrik, 2009).

addition to the above currents can not ignored the existence of radically opposed positions to economic globalization and increasing economic connections in poor countries with the world market on the grounds that their integration into the international capitalist system is a drag that inevitably strengthens previous stagnation and underdevelopment.

(3) Fortunately, the consensus that dominated economic thinking about the virtues of an economic model centered on finance and based on efficient markets that have minimal government intervention because it is considered ineffective and harmful, has been replaced, after outbreak of the current global crisis, with large differences on what is needed done to overcome the crisis. Now, economists can return to being analysts, instead of ideologues, and present the different options involved, listing the most relevant advantages and disadvantages of each option, so that citizens can choose the measures that best represent their social and political preferences (Rodrik, 2009).
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