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Offshoring barriers, regulatory burden and national welfare

Author

Listed:
  • Subhayu Bandyopadhyay

    (Federal Reserve Bank of St. Louis)

  • Arnab Basu

    (Cornell University)

  • Nancy Chau

    (201A Warren Hall, Cornell University)

  • Devashish Mitra

    (Syracuse University)

Abstract

We present a model which considers both the regulatory burden of offshoring barriers and possible terms of trade gains from such barriers. Non-tariff barriers are shown to be unambiguously welfare-reducing, and tariff barriers raise welfare only when associated terms-of-trade gains exceed resulting regulatory burdens, in which case there is a positive optimal offshoring tax. Otherwise, free trade is optimal. Welfare reductions from an offshoring tax are more likely with several developed nations engaging in offshoring. We derive and characterize the Nash equilibrium in such a case.

Suggested Citation

  • Subhayu Bandyopadhyay & Arnab Basu & Nancy Chau & Devashish Mitra, 2023. "Offshoring barriers, regulatory burden and national welfare," Indian Economic Review, Springer, vol. 58(1), pages 227-235, July.
    • Handle: RePEc:spr:inecre:v:58:y:2023:i:1:d:10.1007_s41775-023-00157-0
    DOI: 10.1007/s41775-023-00157-0
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    Keywords

    Offshoring tax; Labor market; Terms of trade;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • H8 - Public Economics - - Miscellaneous Issues

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