By making use of a simple model that does not explicitly include capital, this paper examines the impact of downsizing on skilled-unskilled wage inequality and welfare. The paper shows that downsizing increases wage inequality and its effect on welfare is positive but the relative well-being of...

Within the context of a product variety model, this paper examines the impact of outsourcing of skill-intensive tasks on the skilled–unskilled wage gap. Outsourcing affects the wage gap through direct as well as indirect channels. While outsourcing decreases the effective wage of skilled...