Working Paper

Policy evaluation in the presence of outsourcing: global competitiveness versus political feasibility

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. ; Original title: Oligopoly and outsourcing

Keywords: Contracting out; Labor market;

Status: Published in Economics and Politics, July 2007, 19(2), pp. 219-34

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2007

Number: 2005-074