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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Publisher Info
Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number
2005-074.
Length: Date of creation: 2007 Date of revision: Publication status: Published in Economics and Politics, July 2007, 19(2), pp. 219-34 Handle: RePEc:fip:fedlwp:2005-074