Abstract
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).
Original language | English (US) |
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Pages (from-to) | 209-224 |
Number of pages | 16 |
Journal | Economic Inquiry |
Volume | 58 |
Issue number | 1 |
DOIs | |
State | Published - Jan 1 2020 |
ASJC Scopus subject areas
- General Business, Management and Accounting
- Economics and Econometrics