Global and local subcontracting: Space, ethnicity, and the organization of apparel production

Abstract

Labor-intensive apparel production has shifted to low-wage Asian nations, yet continues to flourish in the United States and other high-wage areas. This paper explains this apparent contradiction by concluding that in addition to labor costs, firm size, ethnicity, market strategy, and trade regulations powerfully affect the location of apparel production. Large firms are more able to disperse production globally than small firms, US-based firms owned by ethnic Asians are more likely to produce in Asian factories than firms of other ethnicities, and firms producing for rapidly changing fashion markets are less likely to produce offshore than firms producing less fashion-intensive products. Finally, trade restrictions powerfully affect the location of production, albeit in ways different than intended by policy makers.