Unemployment and Welfare Consequences of International Outsourcing under Monopolistic Competition
This paper challenges the conventional academic view that international outsourcing is just another form of gainful trade. Contrary to this view, we show that labor-service outsourcing can reduce the high-wage country's welfare even when product-market trade is beneficial, within a model that combines involuntary unemployment and monopolistic competition. Outsourcing's impact on welfare is worsened by a definite loss of jobs and a possible contraction in the range of varieties produced worldwide. While owners of capital benefit from outsourcing under certain conditions, labor's welfare always falls.
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| Length: | 24 pages |
| Date of creation: | 06 Oct 2011 |
| Date of revision: | |
| Publication status: | Published: Carleton Economic Papers |
| Handle: | RePEc:car:carecp:11-07 |
| Contact details of provider: | Postal: Phone: 1-613-520-3744 Fax: 1-613-520-3906
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| Order Information: | Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Devashish Mitra & Priya Ranjan, 2007.
"Offshoring and Unemployment,"
NBER Working Papers
13149, National Bureau of Economic Research, Inc.
- Devashish Mitra & Priya Ranjan, 2007. "Offshoring and Unemployment," Working Papers 060719, University of California-Irvine, Department of Economics.
- Mitra, Devashish & Ranjan, Priya, 2007. "Offshoring and Unemployment," IZA Discussion Papers 2805, Institute for the Study of Labor (IZA).
- Jagdish Bhagwati & Arvind Panagariya, 2004.
"The Muddles over Outsourcing,"
Journal of Economic Perspectives,
American Economic Association, vol. 18(4), pages 93-114, Fall.
- Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 2004. "The Muddles over Outsourcing," International Trade 0408004, EconWPA.
- Richard Brecher & Zhiqi Chen, 2008.
"Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing,"
Carleton Economic Papers
08-07, Carleton University, Department of Economics, revised Nov 2010.
- Richard A. Brecher & Zhiqi Chen, 2010. "Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 990-1000, November.
- Egger, Hartmut & Kreickemeier, Udo, 2008.
"International fragmentation: Boon or bane for domestic employment,"
European Economic Review,
Elsevier, vol. 52(1), pages 116-132, January.
- Hartmut Egger & Udo Kreickemeier, 2005. "International Fragmentation: Boon or Bane for Domestic Employment?," CESifo Working Paper Series 1595, CESifo Group Munich.
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