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Internal and external gains from international outsourcing

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  • Jai-Young Choi
  • Hamid Beladi

Abstract

This article examines the implications of international outsourcing in the Heckscher-Ohlin model of general equilibrium by explicitly expounding the external effects to the outsourcing firms. With its focus paced on the labor-augmenting effect of outsourcing, it shows that (a) the standard result of welfare-enhancing outsourcing always holds in the absence of external effects, and (b) in the presence of external effects, however, (i) outsourcing may be welfare-reducing for the outsourcing country; (ii) the effects of outsourcing on sectoral outputs, employment and factor prices depend on factor-intensity ranking, and the signs and the relative magnitudes of the sectoral returns to scale.

Suggested Citation

  • Jai-Young Choi & Hamid Beladi, 2014. "Internal and external gains from international outsourcing," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(2), pages 299-314, March.
    • Handle: RePEc:taf:jitecd:v:23:y:2014:i:2:p:299-314
    DOI: 10.1080/09638199.2012.730545
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    References listed on IDEAS

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    Cited by:

    1. Choi, Jai-Young & Yu, Eden S. H., 2018. "International Outsourcing, Environmental Costs, and Welfare," ADBI Working Papers 848, Asian Development Bank Institute.

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