International outsourcing, terms of trade and non-immiserization

Jai-Young Choi

International Review of Economics & Finance, 2016, vol. 43, issue C, 222-233

Abstract: This paper investigates the ramifications of international outsourcing for an outsourcing country. It shows that for a small country which is a price taker in the world market, outsourcing occurring in any traded-good sector is welfare-enhancing. For a large country with monopsony power in the world market, outsourcing occurring in the exportable (importable) sector entails pro-trade (anti-trade) effect and deteriorates (improves) the terms of trade weakening (strengthening) the welfare effect — however, outsourcing cannot be immiserizing in any case. These findings are considered vis-à-vis China's outsourcing with its major trading partners including US, EU, Japan, South Korea, Australia, and Hong Kong.

Keywords: Outsourcing; Labor-augmenting effect; Import demand; Terms of trade; Non-immiserization (search for similar items in EconPapers)
JEL-codes: F11 F13 F22 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:43:y:2016:i:c:p:222-233

DOI: 10.1016/j.iref.2016.02.011

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