Policy Evaluation in the Presence of Outsourcing: Global Competitiveness versus Political Feasibility

16 Pages Posted: 26 Jun 2007

See all articles by Subhayu Bandyopadhyay

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division; IZA Institute of Labor Economics; West Virginia University

Howard J. Wall

Lindenwood University - Center for Economics and the Environment

Abstract

We analyze the effects of outsourcing in the presence of a minimum wage by presenting a general-equilibrium model with an oligopolistic export sector and a competitive import-competing sector. An outsourcing tax is politically popular because it switches jobs to unemployed natives. It is also economically sound because it raises national income. An export subsidy may or may not be justified on welfare grounds. Increased international competition has no effect on the level of outsourcing, but the direction of its effect on unemployment and national income depends on the relative factor intensities of the two sectors.

Suggested Citation

Bandyopadhyay, Subhayu and Wall, Howard J., Policy Evaluation in the Presence of Outsourcing: Global Competitiveness versus Political Feasibility. Economics & Politics, Vol. 19, No. 2, pp. 219-234, July 2007. Available at SSRN: https://ssrn.com/abstract=995308 or http://dx.doi.org/10.1111/j.1468-0343.2007.00309.x

Subhayu Bandyopadhyay (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
PO Box 442
St. Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

West Virginia University ( email )

Morgantown, WV 26506-6025
United States
304-293-7879 (Phone)
304-293-7061 (Fax)

Howard J. Wall

Lindenwood University - Center for Economics and the Environment ( email )

209 S. Kingshighway
St. Charles, MO 63301
United States

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