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International outsourcing, terms of trade and non-immiserization

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  • Choi, Jai-Young

Abstract

This paper investigates the ramifications of international outsourcing for an outsourcing country. It shows that for a small country which is a price taker in the world market, outsourcing occurring in any traded-good sector is welfare-enhancing. For a large country with monopsony power in the world market, outsourcing occurring in the exportable (importable) sector entails pro-trade (anti-trade) effect and deteriorates (improves) the terms of trade weakening (strengthening) the welfare effect — however, outsourcing cannot be immiserizing in any case. These findings are considered vis-à-vis China's outsourcing with its major trading partners including US, EU, Japan, South Korea, Australia, and Hong Kong.

Suggested Citation

  • Choi, Jai-Young, 2016. "International outsourcing, terms of trade and non-immiserization," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 222-233.
    • Handle: RePEc:eee:reveco:v:43:y:2016:i:c:p:222-233
    DOI: 10.1016/j.iref.2016.02.011
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    References listed on IDEAS

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    More about this item

    Keywords

    Outsourcing; Labor-augmenting effect; Import demand; Terms of trade; Non-immiserization;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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