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International Outsourcing and Welfare Reduction: an Entry-deterrence Story

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  • Arijit Mukherjee
  • Yingyi Tsai

Abstract

We show that international outsourcing may reduce welfare of the outsourcing country by deterring market-entry, thus showing a new effect which is different from the employment and the quality effects creating negative impacts of outsourcing. Entry deterrence under outsourcing reduces domestic welfare if both the profit extraction and cost saving from outsourcing are sufficiently small.

Suggested Citation

  • Arijit Mukherjee & Yingyi Tsai, "undated". "International Outsourcing and Welfare Reduction: an Entry-deterrence Story," Discussion Papers 08/45, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:08/45
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    References listed on IDEAS

    as
    1. Arijit Mukherjee & Soma Mukherjee, 2008. "Excess-Entry Theorem: The Implications Of Licensing," Manchester School, University of Manchester, vol. 76(6), pages 675-689, December.
    2. Gene M. Grossman & Elhanan Helpman, 2003. "Outsourcing Versus FDI in Industry Equilibrium," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 317-327, 04/05.
    3. Buehler, Stefan & Haucap, Justus, 2006. "Strategic outsourcing revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 325-338, November.
    4. Frank Stähler, 2007. "A Model of Outsourcing and Foreign Direct Investment," Review of Development Economics, Wiley Blackwell, vol. 11(2), pages 321-332, May.
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    6. Erica L. Groshen & Simon M. Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Aug).
    7. Mitra, Devashish & Ranjan, Priya, 2008. "Temporary shocks and offshoring: The role of external economies and firm heterogeneity," Journal of Development Economics, Elsevier, vol. 87(1), pages 76-84, August.
    8. Anderson, Simon P & de Palma, Andre & Nesterov, Yurii, 1995. "Oligopolistic Competition and the Optimal Provision of Products," Econometrica, Econometric Society, vol. 63(6), pages 1281-1301, November.
    9. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    10. Shy, Oz & Stenbacka, Rune, 2003. "Strategic outsourcing," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 203-224, February.
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    12. Hartmut Egger & Peter Egger, 2001. "Market Concentration and International Outsourcing," WIFO Working Papers 166, WIFO.
    13. Glass, Amy Jocelyn & Saggi, Kamal, 2001. "Innovation and wage effects of international outsourcing," European Economic Review, Elsevier, vol. 45(1), pages 67-86, January.
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    15. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 85-120.
    16. Sugata Marjit & Arijit Mukherjee, 2008. "International Outsourcing and R&D: Long-Run Implications for Consumers," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 1010-1022, November.
    17. Sugata Marjit & Arijit Mukherjee, 2008. "Profit reducing international outsourcing," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(1), pages 21-35.
    18. Selin Sayek & Fuat Sener, 2006. "Outsourcing and Wage Inequality in a Dynamic Product Cycle Model," Review of Development Economics, Wiley Blackwell, vol. 10(1), pages 1-19, February.
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    Cited by:

    1. Kabiraj, Tarun & Sinha, Uday Bhanu, 2016. "Strategic outsourcing with technology transfer under price competition," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 281-290.
    2. repec:eee:reveco:v:53:y:2018:i:c:p:16-24 is not listed on IDEAS
    3. Tarun Kabiraj & Uday Bhanu Sinha, 2011. "Strategic Outsourcing with Technology Transfer," Working papers 203, Centre for Development Economics, Delhi School of Economics.
    4. Tarun Kabiraj & Uday Bhanu Sinha, 2014. "Strategic Outsourcing with Technology Transfer under Cournot Competition," Economics Bulletin, AccessEcon, vol. 34(2), pages 1133-1140.

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    Keywords

    Entry; Outsourcing; Welfare;

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