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...

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...