USING OFFSETS IN PROCUREMENT AS AN ECONOMIC DEVELOPMENT POLICY Abstract

Travis K. Taylor Alfred University

In the conclusion of Udis and Maskus (1991, p. 163), the authors recommend "a serious effort to develop a criteria to distinguish between beneficial offsets and detrimental offsets before attempts at international control of the phenomenon are mounted." This paper develops a criterion to determine when the offset is an appropriate policy instrument for government procurement. I present a policy matrix that offers some general guidelines to government officials considering offsets as part of a broader procurement strategy. The matrix permits us to assess the comparative efficiency of several kinds of offsets under alternative institutional environments. Using transaction cost theory grounded in the capabilities view of the firm, I explain how offset efficiency hinges on the exchange setting and the institutions of the purchasing economy.