Sebastian Krautheim, Thierry Verdier · 2016
Journal of International Economics · Elsevier BV

Offshoring with endogenous NGO activism

The process of globalization is characterized by an impressive growth of global value chains, as well as the proliferation of non-governmental organizations (NGOs) interacting with multinational firms. This paper presents a model of offshoring and NGO–firm interactions in which offshoring to a low-regulation country allows a monopolist to implement a “dirty” technology undesired by consumers. Consumers can reduce the incentive for dirty production by financing an NGO monitoring the firm. NGO emergence and offshoring can arise as joint and interacting outcomes. For a range of trade costs, NGO emergence allows firms to capture gains from globalization, which would otherwise be unattainable. Somewhat paradoxically, NGO emergence can be at the expense of consumers possibly leading to welfare losses through offshoring.

Full publication is available on: DOI 10.1016/j.jinteco.2016.03.009

Contributors from our Network

Sebastian Krautheim

Sebastian Krautheim
University of Passau

Sebastian Krautheim is a Professor of International Economics at the University of Passau. His research interests are in international trade, global value chains, and social activism. He is principle investigator of a DFG-funded research project on “Global Production and its Watchdogs: Firms and NGOs in the Regulatory Void”. He holds a PhD in Economics from the European University Institute.

Read more about Sebastian Krautheim ›

Share on:

Stay tuned on the latest news from our research network.