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Two-Way Outsourcing, International Migration, and Wage Inequality

  • Morihiro Yomogida

    (Faculty of Economics, Sophia University, Japan)

  • Laixun Zhao

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

This paper develops a general equilibrium model with a vertical production structure to examine the relationship between offshore outsourcing and international migration,especially emphasizing their effects on the wages of skilled and unskilled workers. Two-way outsourcing (simultaneous insourcing and outsourcing) in skilled-labor intensive services arises due to product differentiation and scale economies, and outsourcing in unskilled-labor intensive processing occurs because of factor endowment differences. The tractability of the model allows us to rank outsourcing and migration, according to the wages of both types of workers. Finally, we also analyze under what conditions outsourcing and international migration are complements or substitutes.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp241.pdf
File Function: First version, 2009
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Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 241.

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Length: 38 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:kob:dpaper:241
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