The paper investigates the consequences of outsourcing of labor intensive activities to low-wage economies. This trend … markets are missing. The main results are: (i) outsourcing raises unemployment and labor income risk of unskilled workers; (ii …) it increases inequality among high- and low-income groups; and (iii) the gains from outsourcing can be made Pareto …

distinguish between domestic and foreign sourcing, as well as between outsourcing and vertical integration. A firm's choice is … model. -- productivity ; outsourcing ; intra-firm trade ; foreign direct investment ; incomplete contracts ; firm-level data …

the public concern can be addressed that international fragmentation and outsourcing to low wage countries lead to … outsourcing and critically assess the role of political intervention that aims to reduce unemployment benefits under …

. Such outsourcing leads to increased wages for the remaining inhouse production. We find that stronger unions, which imply … higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a … theoretical reconciliation of the empirically observed trends of deunionization and increased international outsourcing in many …