Sebastian Krautheim

Offshoring with Endogenous NGO Activism

The process of globalisation is characterised by an impressive growth of global value chains, as well as the proliferation of non-governmental organisations (NGOs) interacting with multinational firms. Sebastian Krautheim, together with Thierry Verdier, present 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 that monitors the firm. For a range of trade costs, NGO emergence allows firms to capture gains from globalisation which would otherwise be unattainable. Somewhat paradoxically, NGO emergence can be at the expense of consumers, possibly leading to welfare losses through offshoring.

The focus of Sebastian Krautheim's research is on international trade, foreign direct investment, international tax competition and, more recently, on the effect of internationally active advocacy NGOs on international sourcing decisions of multinational firms.

During his research stay at Ifo, Mr Krautheim plans to advance his research agenda on the role advocacy NGOs play for firms and governments that face the opportunities and constraints of an increasingly integrated world economy. When multinational firms seek to benefit from global differences in regulation, they run the risk of being targeted by an advocacy NGO calling for a boycott.

Sebastian Krautheim is Full Professor (W3) of International Economics at the University of Passau. He was previously Assistant Professor (Junior Professor, W1) of International Economics at the Goethe University Frankfurt and Postdoctoral Research Fellow at the Paris School of Economics. His PhD in Economics is from the European University Institute, Florence, where his Supervisor was Giancarlo Corsetti.