Manufacturing Outsourcing, Onshoring, and Global Equilibrium Harvard Case Solution & Analysis

Fabricating is currently a national strategy for a lot of states to fight slow economic growth, and positively seen together with the present trend of on shoring foreign manufacturing operations. We develop a cross-country regression model that predicts production employment as a function of population growth, foreign direct investment, and purchasing power parity. Results through the year 2100 indicate that manufacturing is trending toward a worldwide equilibrium with higher levels of outputs that are producing but considerably lower levels of manufacturing employment.

The reason is that states have a tendency to evolve from having little manufacturing to low wages and commodity production at large scale. As infrastructure and human capital develop, there exists the inclination to pursue innovative manufacturing in support.  The manufacturing of the commodity product is outsourced to distinct countries having lower costs backed up by their under-developed infrastructure and the human capital, and so the virtuous circle continues.

The awful news is these increases are unlikely to be sustainable in the future, while this model implies that current attempts in revitalization of domestic manufacturing would result in a rise in wealth in the United States.


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