Inshoring : The Geographic Fragmentation of Production and Inequality

The advent of information technology facilitates geographic separation of production tasks, which is referred to as offshoring in international contexts and inshoring in domestic contexts. Although the literature on offshoring has flourished, the research on inshoring is limited. This paper examines inshoring on both empirical and theoretical fronts. Empirically, it shows that business support services have been increasingly sent to small localities for cost savings while being separated from their downstream industries, which have been consistently concentrated in big cities. Theoretically, it analyzes the welfare impact of inshoring. Contrary to a prediction in the offshoring literature, (domestic) support workers can be better off. This is primarily because inshoring allows support workers to benefit from higher urban productivity without bearing urban costs