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Immigration and outsourcing: a general equilibrium analysis

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  • Subhayu Bandyopadhyay
  • Howard J. Wall

Abstract

We analyze the effects of outsourcing in the presence of a minimum wage by presenting a general-equilibrium model with an oligopolistic export sector and a competitive import-competing sector. An outsourcing tax is politically popular because it switches jobs to unemployed natives. It is also economically sound because it raises national income. An export subsidy may or may not be justified on welfare grounds. Increased international competition has no effect on the level of outsourcing, but the direction of its effect on unemployment and national income depends on the relative factor intensities of the two sectors.

Suggested Citation

  • Subhayu Bandyopadhyay & Howard J. Wall, 2007. "Immigration and outsourcing: a general equilibrium analysis," Working Papers 2005-058, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2005-058
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    References listed on IDEAS

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    1. Antonio Spilimbergo & Gordon H. Hanson, 1999. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," American Economic Review, American Economic Association, vol. 89(5), pages 1337-1357, December.
    2. Djajic, Slobodan, 1997. "Illegal Immigration and Resource Allocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 97-117, February.
    3. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March.
    4. Bond, Eric W. & Chen, Tain-Jy, 1987. "The welfare effects of illegal immigration," Journal of International Economics, Elsevier, vol. 23(3-4), pages 315-328, November.
    5. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
    6. Subhayu Bandyopadhyay, 2006. "Illegal Immigration and Second-best Import Tariffs," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 93-103, February.
    7. Djajic, Slobodan, 1987. "Illegal aliens, unemployment and immigration policy," Journal of Development Economics, Elsevier, vol. 25(1), pages 235-249, February.
    8. Jones, Ronald W., 2005. "Immigration vs. outsourcing: Effects on labor markets," International Review of Economics & Finance, Elsevier, vol. 14(2), pages 105-114.
    9. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    10. Gaytan-Fregoso, Helena & Lahiri, Sajal, 2000. "Foreign aid and illegal immigration," Journal of Development Economics, Elsevier, vol. 63(2), pages 515-527, December.
    11. Bandyopadhyay, Subhayu & Bandyopadhyay, Sudeshna Champati, 1998. "Illegal immigration: a supply side analysis," Journal of Development Economics, Elsevier, vol. 57(2), pages 343-360.
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    Citations

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    Cited by:

    1. Hübler, Michael, 2007. "A simple model of outsourcing with Cournot competition," Kiel Working Papers 1320, Kiel Institute for the World Economy (IfW).
    2. Elena Podrecca & Gianpaolo Rossini, 2015. "International Factor Mobility, Wages and Prices," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 683-694, August.
    3. Cosimo BEVERELLI & Gianluca OREFICE & Nadia ROCHA, 2011. "Offshoring and migration in a world with policy spillovers," Departmental Working Papers 2011-25, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    4. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    5. Giorgio Barba Navaretti & Giuseppe Bertola & Alessandro Sembenelli, 2008. "Offshoring and Immigrant Employment: Firm-level Theory and Evidence," Development Working Papers 245, Centro Studi Luca d'Agliano, University of Milano.
    6. Cosimo Beverelli & Gianluca Orefice & Nadia Rocha, 2016. "The Impact of Offshoring and Migration Policies on Migration Flows," Working Papers 2016-21, CEPII research center.
    7. Hatzigeorgiou, Andreas & Karpaty, Patrik & Kneller, Richard & Lodefalk, Magnus, 2016. "Do Immigrants Spur Offshoring? Firm-Level Evidence," Working Papers 2016:7, Örebro University, School of Business.
    8. Joseph Pelzman, 2013. "“Womb for Rent”: International Service Trade Employing Assisted Reproduction Technologies (ARTs)," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 387-400, August.
    9. Simontini Das & Ajitava Raychaudhuri & Saikat Sinha Roy, 2012. "Immigration Versus Outsourcing: A Developing Country¡¯S View," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(2), pages 109-138, June.

    More about this item

    Keywords

    Immigrants ; Labor market ; Contracting out;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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