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Outsourcing, unemployment and welfare policy

Christian Keuschnigg and Evelyn Ribi

Journal of International Economics, 2009, vol. 78, issue 1, 168-176

Abstract: The paper investigates the consequences of outsourcing of labor intensive activities to low-wage economies. This trend challenges the two basic functions of the welfare state, redistribution and social insurance when private unemployment insurance markets are missing. The main results are: (i) outsourcing raises unemployment and labor income risk of unskilled workers; (ii) it increases inequality between high- and low-income groups; and (iii) the gains from outsourcing can be made Pareto improving by using a redistributive linear income tax if redistribution is initially not too large. We finally derive the welfare optimal redistribution and unemployment insurance policies.

Keywords: Outsourcing; Unemployment; Social; insurance; Redistribution (search for similar items in EconPapers)
Date: 2009
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Working Paper: Outsourcing, Unemployment and Welfare Policy (2008) Downloads
Working Paper: Outsourcing, Unemployment and Welfare Policy (2007) Downloads
Working Paper: Outsourcing, Unemployment and Welfare Policy (2007) Downloads
Working Paper: Outsourcing, Unemployment and Welfare Policy (2007) Downloads
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