Outsourcing and the Heckscher–Ohlin Model

Ravi Batra and Hamid Beladi

Review of International Economics, 2010, vol. 18, issue 2, 277-288

Abstract: 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 generally raises the return to capital and lowers the real wage, although the nation's GDP rises in proportion to the value‐added in the outsourcing industry. Furthermore, the output of the outsourcing sector may actually fall even though its unit cost goes down; the output of the other sector then rises. By contrast, employment in the outsourcing sector may actually rise.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9396.2010.00857.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reviec:v:18:y:2010:i:2:p:277-288

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576

Access Statistics for this article

Review of International Economics is currently edited by E. Kwan Choi

More articles in Review of International Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().