TY - JOUR
T1 - CONSEQUENCES OF OFFSHORING TO DEVELOPING NATIONS
T2 - LABOR-MARKET OUTCOMES, WELFARE, AND CORRECTIVE INTERVENTIONS
AU - Bandyopadhyay, Subhayu
AU - Basu, Arnab K.
AU - Chau, Nancy H.
AU - Mitra, Devashish
N1 - Publisher Copyright:
© 2019 Western Economic Association International
PY - 2020/1/1
Y1 - 2020/1/1
N2 - Our parsimonious two-country (developed country and developing country) model of offshoring provides nuanced results. These include cases where wages monotonically improve, as well as where wages exhibit an inverted-U relationship with offshoring cost reductions. We identify conditions under which these relationships hold. Since global welfare always rises with improvements in offshoring technology, we find that there is a role for a minimum wage (alternatively, wage tax) in the developing country. We derive such a policy's optimal level. There is also the possibility of a developed country optimal offshoring tax for extracting terms-of-trade benefits. We, finally, analyze the two-country Nash equilibrium in policies. (JEL F11, F13, F16, F66, O19, O24).
AB - Our parsimonious two-country (developed country and developing country) model of offshoring provides nuanced results. These include cases where wages monotonically improve, as well as where wages exhibit an inverted-U relationship with offshoring cost reductions. We identify conditions under which these relationships hold. Since global welfare always rises with improvements in offshoring technology, we find that there is a role for a minimum wage (alternatively, wage tax) in the developing country. We derive such a policy's optimal level. There is also the possibility of a developed country optimal offshoring tax for extracting terms-of-trade benefits. We, finally, analyze the two-country Nash equilibrium in policies. (JEL F11, F13, F16, F66, O19, O24).
UR - http://www.scopus.com/inward/record.url?scp=85071466243&partnerID=8YFLogxK
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U2 - 10.1111/ecin.12833
DO - 10.1111/ecin.12833
M3 - Article
AN - SCOPUS:85071466243
SN - 0095-2583
VL - 58
SP - 209
EP - 224
JO - Economic Inquiry
JF - Economic Inquiry
IS - 1
ER -