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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.

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  • Subhayu Bandyopadhyay & Howard J. Wall, 2007. "Policy Evaluation In The Presence Of Outsourcing: Global Competitiveness Versus Political Feasibility," Economics and Politics, Wiley Blackwell, vol. 19(2), pages 219-234, July.
    • Handle: RePEc:bla:ecopol:v:19:y:2007:i:2:p:219-234
    DOI: 10.1111/j.1468-0343.2007.00309.x
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    1. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
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    4. Subhayu Bandyopadhyay & Howard J. Wall, 2005. "Oligopoly and Outsourcing [Oligopoly and OUtsourcing]," Working Papers 05-09 Classification-, Department of Economics, West Virginia University.
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