Delaying the timing of offshoring low-skilled tasks
AbstractThis paper examines the impact of uncertainty on offshoring low-skilled tasks. The model shows that greater demand uncertainty adversely affects the expected profit and timing of offshoring. It is also shown that a home-country tax rate deduction increases the volatility of the expected profits, making offshoring appear to be more risky. One policy implication of our results is that, in order to delay relocation of MNE's production from the home country, a government should adopt tax rate deduction rather than a direct subsidy because the former is more economical and effective than the latter.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 27 (2010)
Issue (Month): 5 (September)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411
Offshoring Multinational enterprises Option-pricing model Fiscal policy;
Other versions of this item:
- Felipa de Mello-Sampayo & Sofia de Sousa-Vale & Francisco Camões, 2008. "Delaying the Timing of Offshoring Low-Skilled Tasks," Working Papers Series 1 ercwp1208, ISCTE-IUL, Business Research Unit (BRU-IUL).
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
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