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Policy evaluation in the presence of outsourcing: global competitiveness versus political feasibility

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  • Subhayu Bandyopadhyay
  • Howard J. Wall

Abstract

We analyze the effects of outsourcing in the presence of a minimum wage by presenting a general-equilibrium model with an oligopolistic export sector and a competitive import-competing sector. An outsourcing tax is politically popular because it switches jobs to unemployed natives. It is also economically sound because it raises national income. An export subsidy may or may not be justified on welfare grounds. Increased international competition has no effect on the level of outsourcing, but the direction of its effect on unemployment and national income depends on the relative factor intensities of the two sectors. ; Original title: Oligopoly and outsourcing

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2005-074.

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Date of creation: 2007
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Publication status: Published in Economics and Politics, July 2007, 19(2), pp. 219-34
Handle: RePEc:fip:fedlwp:2005-074

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Keywords: Contracting out ; Labor market;

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  1. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March.
  2. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
  3. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  4. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  5. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 2004. "The Muddles over Outsourcing," International Trade 0408004, EconWPA.
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Cited by:
  1. Alina Hagiu & Emilia Clipici, 2009. "The National And The European Union Business Environment In The Context Of The Knowledge-Based Economy," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.

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