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International Outsourcing and Welfare Reduction: an Entry-deterrence Story

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  • Arijit Mukherjee
  • Yingyi Tsai

Abstract

We show that international outsourcing may reduce welfare of the outsourcing country by deterring market-entry, thus showing a new effect which is different from the employment and the quality effects creating negative impacts of outsourcing. Entry deterrence under outsourcing reduces domestic welfare if both the profit extraction and cost saving from outsourcing are sufficiently small.

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File URL: http://www.nottingham.ac.uk/gep/documents/papers/2008/08-45.pdf
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Bibliographic Info

Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 08/45.

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Handle: RePEc:not:notgep:08/45

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Keywords: Entry; Outsourcing; Welfare;

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References

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  1. Sugata Marjit & Arijit Mukherjee, 2008. "Profit reducing international outsourcing," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(1), pages 21-35.
  2. Gene M. Grossman & Elhanan Helpman, 2002. "Outsourcing versus FDI in Industry Equilibrium," NBER Working Papers 9300, National Bureau of Economic Research, Inc.
  3. Mitra, Devashish & Ranjan, Priya, 2008. "Temporary shocks and offshoring: The role of external economies and firm heterogeneity," Journal of Development Economics, Elsevier, vol. 87(1), pages 76-84, August.
  4. Erica L. Groshen & Simon Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Aug).
  5. Arijit Mukherjee & Soma Mukherjee, 2008. "Excess-Entry Theorem: The Implications Of Licensing," Manchester School, University of Manchester, vol. 76(6), pages 675-689, December.
  6. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  7. Anderson, S. P. & De Palma, A. & Nesterov, Y., . "Oligopolistic competition and the optimal provision of products," CORE Discussion Papers RP -1179, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Jones, Ronald W., 2005. "Immigration vs. outsourcing: Effects on labor markets," International Review of Economics & Finance, Elsevier, vol. 14(2), pages 105-114.
  9. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  10. Frank Stähler, 2007. "A Model of Outsourcing and Foreign Direct Investment," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 321-332, 05.
  11. Pack, Howard & Saggi, Kamal, 2001. "Vertical technology transfer via international outsourcing," Journal of Development Economics, Elsevier, vol. 65(2), pages 389-415, August.
  12. Selin Sayek & Fuat Sener, 2006. "Outsourcing and Wage Inequality in a Dynamic Product Cycle Model," Review of Development Economics, Wiley Blackwell, vol. 10(1), pages 1-19, 02.
  13. Hartmut Egger & Peter Egger, 2001. "Market Concentration and International Outsourcing," WIFO Working Papers 166, WIFO.
  14. Glass, Amy Jocelyn & Saggi, Kamal, 2001. "Innovation and wage effects of international outsourcing," European Economic Review, Elsevier, vol. 45(1), pages 67-86, January.
  15. Sugata Marjit & Arijit Mukherjee, 2008. "International Outsourcing and R&D: Long-Run Implications for Consumers," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 1010-1022, November.
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Cited by:
  1. Tarun Kabiraj & Uday Bhanu Sinha, 2014. "Strategic Outsourcing with Technology Transfer under Cournot Competition," Economics Bulletin, AccessEcon, vol. 34(2), pages 1133-1140.
  2. Tarun Kabiraj & Uday Bhanu Sinha, 2011. "Strategic Outsourcing with Technology Transfer," Working papers 203, Centre for Development Economics, Delhi School of Economics.

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