Outsourcing not a major factor in productivity differences across countries.
The article explores how outsourcing, market power, and factor allocation impact economic performance. The researchers use theoretical models and data analysis to show that outsourcing intensity varies across countries due to financial characteristics. They find that outsourcing has a modest effect on productivity. Heterogeneous market power affects resource misallocation, with increasing competition improving productivity. The study also reveals systematic patterns in factor inputs along production chains, with downstream firms hiring skilled workers for complex products.