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...

Outsourcing has become an increasingly contentious subject ever since N. Gregory Mankiw remarked in 2004 that outsourcing is just another way of doing international trade, and must be beneficial to the nation, including the workers. We construct a simple two-sector specific-factor model and...

Most economists consider the debate on free trade closed for all practical purposes. DLUHOSCH, FREYTAG and KRUEGER [1998] criticize an earlier paper by BATRA and BELADI [1996] and argue that freer trade has contributed to a rise in US growth of investment and social welfare. Using raw figures,...

In this paper we develop a simple general equilibrium model of trade to analyze the impact of tariffs and technical progress on the equilibrium rate of unemployment. We demonstrate that if a country imposes a tariff its equilibrium rate of unemployment is likely to rise, whereas the impact of...