Outsourcing and the Heckscher-Ohlin Model
The purpose of this paper is to incorporate the currently mushrooming phenomenon of outsourcing into the standard two-sector, two-factor Heckscher-Ohlin model of international trade. We first show how outsourcing modifies a firm's production function, and then demonstrate that outsourcing generally raises the return to capital and lowers the real wage, although the nation's GDP rises in proportion to the value-added in the outsourcing industry. Furthermore, the output of the outsourcing sector may actually fall even though its unit cost goes down; the output of the other sector then rises. By contrast, employment in the outsourcing sector may actually rise. Copyright © 2010 Blackwell Publishing Ltd.
Year of publication: |
2010
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Authors: | Batra, Ravi ; Beladi, Hamid |
Published in: |
Review of International Economics. - Wiley Blackwell, ISSN 0965-7576. - Vol. 18.2010, 2, p. 277-288
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Publisher: |
Wiley Blackwell |
Saved in:
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