Offshoring Barriers, Regulatory Burden and National Welfare
Subhayu Bandyopadhyay (),
Arnab Basu (),
Nancy Chau () and
Devashish Mitra ()
No 2018-3, Working Papers from Federal Reserve Bank of St. Louis
We present a model which considers both regulatory burden of offshoring barriers and possible terms of trade gains from such barriers. Non-tariff barriers are shown to be unambiguously welfare-reducing, and tariff barriers raise welfare only when associated terms-of-trade gains exceed resulting regulatory burdens, in which case there is a positive optimal offshoring tax. Otherwise, free trade is optimal. Welfare reductions from an offshoring tax are more likely with several developed nations engaging in offshoring. We derive and characterize the Nash equilibrium in such a case.
Keywords: Offshoring tax; labor market; terms of trade (search for similar items in EconPapers)
JEL-codes: F1 H8 (search for similar items in EconPapers)
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