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Outsourcing, Income Distribution, and Unemployment


  • Yabuuchi, Shigemi

    () (Aichi University)


This paper examines the effects of outsourcing on employment and unemployment and income distribution in an economy with Harris-Todaro type unemployment. This is because both wages and jobs are important concerns for an economy that engages in outsourcing and consequently experiences widespread unemployment. The main findings of this paper are as follows: (i) If the outsourced factor is not produced domestically, outsourcing increases the rural wage rate (and the expected urban wage rate) and decreases the unemployed-to-employed ratio in the urban area, and it may increase unemployment in the home country. (ii) If the outsourced factor is produced domestically, outsourcing may decrease the rural wage rate (and the expected urban wage rate), and may increase the unemployedto- employed ratio in the urban area if the rural wage rate is not sensitive to the employment in the rural sectors.

Suggested Citation

  • Yabuuchi, Shigemi, 2011. "Outsourcing, Income Distribution, and Unemployment," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 705-720.
  • Handle: RePEc:ris:integr:0555

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    More about this item


    Outsourcing; Unemployment; Income distribution;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure


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