Policy Evaluation in the Presence of Outsourcing : Global Competitiveness versus Political Feasibility
With outsourcing comes a perceived tension between the competitive pressures faced by domestic firms and the effect that outsourcing has on domestic workers. To address this tension, we present a general-equilibrium model with an oligopolistic export sector and a competitive import-competing sector. When there is a minimum wage, an outsourcing tax switches jobs to unemployed natives . In this case, the policy is both politically popular and economically sound because it raises national income . This is possible because of the pre-existing distortion in the labor market caused by the minimum wage. The effect of an export subsidy is less clear . It may or may not be justified on welfare grounds . Also, 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. The paper is extended to consider the scenarios of wage flexibility and price competition.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 6025, Morgantown, WV 26506-6025|
Phone: (304) 293-7859
Fax: (304) 293-2233
Web page: http://be.wvu.edu/phd_economics/
More information through EDIRC
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.:
- Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 2004.
"The Muddles over Outsourcing,"
- Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March.
- Jonathan Eaton & Gene M. Grossman, 1983.
"Optimal Trade and Industrial Policy Under Oligopoly,"
NBER Working Papers
1236, National Bureau of Economic Research, Inc.
- Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
- Brecher, Richard A., 1974. "Optimal commercial policy for a minimum-wage economy," Journal of International Economics, Elsevier, vol. 4(2), pages 139-149, May.
- Brander, James A. & Spencer, Barbara J., 1985.
"Export subsidies and international market share rivalry,"
Journal of International Economics,
Elsevier, vol. 18(1-2), pages 83-100, February.
- James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
- Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
- Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 98-116.
When requesting a correction, please mention this item's handle: RePEc:wvu:wpaper:06-13. 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: (Josh Hall)
If references are entirely missing, you can add them using this form.