Offshoring,globalization, and welfare |
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| Institution: | 1. Graduate School of Information Sciences, Tohoku University, Sendai 980-8579, Japan;2. School of Management, University of Chinese Academy of Sciences, Beijing 100190, China;1. Assistant Professor Department of Computer Science and Engineering Anna University Regional Office, Madurai, Tamilnadu, India;2. Professor Department of Information Technology K.L.N.College of Engineering, Pottapalayam, Sivaganga, Tamil Nadu, India;1. Department of Applied Math I, University of Seville, Spain;2. Department of Statistics and Operational Research, University of Seville, Spain;1. Institute of Interdisciplinary Information Sciences, Tsinghua University, Beijing, China;2. Institute of Theoretical Computer Science, School of Information Management and Engineering, Shanghai University of Finance and Economics, Shanghai, China;1. Department of Mathematics, University of Bayreuth, Germany;2. Department of Economics, University of Bayreuth, Germany;3. Public Choice Research Centre, University of Turku, Finland |
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| Abstract: | We investigate the issue of offshoring in a general-equilibrium model of two countries and one sector of increasing returns to scale. Our model uncovers that offshoring occurs and endogenously evolves in a bell-shaped pattern when trade costs decline, explaining some stylized facts in developed countries. Furthermore, this simple framework can be applied to examine the welfare issue. We find that a fall in offshoring costs benefits the high-wage country but hurts the low-wage country. On the other hand, the low-wage country benefits with trade liberalization. The impact of falling trade costs on the welfare of the high-wage country depends on the values of offshoring freeness. |
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| Keywords: | Offshoring Globalization Welfare Footloose capital |
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