Reshoring to survive? The other side of de-globalization

Abstract

Abstract As the costs of global production fragmentation rise, advanced economies have introduced policies that promote the relocation of previously offshored tasks back to the home country, encouraging investment in automation and green technologies. However, the evidence on reshoring remains limited. Drawing on Antràs (De-globalisation? Global value chains in the post-COVID-19 age. National Bureau of Economic Research: Technical report, 2020), we offer a conceptual framework to understand why firms reshore and why such decisions remains relatively rare. Value chains are “sticky”, particularly for large firms, and investment in automation implies new costs to firms already burdened by rising offshoring costs. As a result, globalization shocks have uneven impacts, varying by firm size and their ability to manage both explicit and “hidden” costs of offshoring. For larger firms, automation-driven reshoring may not be as profitable as alternatives like “nearshoring” or “friendshoring.” In contrast, smaller and less internationally exposed firms may turn to reshoring to contain losses—ultimately, to survive.

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