Incidence of an outsourcing tax on intermediate inputs
The paper uses a Hecksher-Ohlin-Samuelson type general equilibrium framework to consider the incidence of an outsourcing tax on an economy in which the production of a specific intermediate input has been fragmented and outsourced. When the input is ?non-traded?, the outsourcing tax can reduce domestic wages even if the intermediate input producing sector is the most capital-intensive sector of the economy. This implies that contrary to received wisdom, a tax on a capital-intensive sector may actually hurt labor. On the other hand, if the intermediate input is traded, the outsourcing tax must close down the final good producing sector that uses it specifically in its production. In turn, this may force the government to look for additional policy instruments to help sustain this domestic industry.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.stlouisfed.org/
More information through EDIRC
|Order Information:|| Email: |
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.:
- James R. Markusen & Anthony J. Venables, 2005.
"A Multi-Country Approach to Factor-Proportions Trade and Trade Costs,"
NBER Working Papers
11051, National Bureau of Economic Research, Inc.
- Markusen, James R. & Venables, Anthony J, 2005. "A Multi-Country Approach to Factor-Proportions Trade and Trade Costs," CEPR Discussion Papers 4872, C.E.P.R. Discussion Papers.
- Jim Markusen & Anthony Venables, 2005. "A Multi-Country Approach to Factor Proporations Trade and Trade Costs," The Institute for International Integration Studies Discussion Paper Series iiisdp051, IIIS.
- Keith Head & Thierry Mayer & John Ries, 2008.
"How Remote is the Offshoring Threat ?,"
Sciences Po publications
info:hdl:2441/10143, Sciences Po.
- Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
- Gene M. Grossman & Esteban Rossi-Hansberg, 2008.
"Trading Tasks: A Simple Theory of Offshoring,"
American Economic Review,
American Economic Association, vol. 98(5), pages 1978-97, December.
- Leamer, Edward E, 1996. "Wage Inequality from International Competition and Technological Change: Theory and Country Experience," American Economic Review, American Economic Association, vol. 86(2), pages 309-14, May.
When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:2009-039. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)
If references are entirely missing, you can add them using this form.