Delaying the Timing of Offshoring Low-Skilled Tasks

Felipa De Mello-Sampayo, Sofia de Sousa-Vale and Francisco Camões
Additional contact information
Sofia de Sousa-Vale: ISCTE - Department of Economics and UNIDE-ERC
Francisco Camões: ISCTE - Department of Economics and UNIDE-ERC

No ercwp1208, Working Papers Series 1 from ISCTE-IUL, Business Research Unit (BRU-IUL)

Abstract: This paper examines the impact of uncertainty on offshoring low-skilled tasks. The model shows that greater demand uncertainty adversely affects the expected profit and timing of offshoring. It is also shown that a home country tax rate deduction increases the volatility of the expected profits, making offshoring appear to be more risky. One policy implication of our results is that, in order to delay relocation of MNE’s production from the home country, a government should adopt tax rate deduction rather than a direct subsidy because the former is more economical and effective than the latter.

Keywords: Offshoring; Multinational Enterprises; Option-Pricing Model; Fiscal Policy (search for similar items in EconPapers)
JEL-codes: D81 F23 G38 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2008-06-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://bru-unide.iscte.pt/RePEc/pdfs/ERCwp1208.pdf First version, 2008 (application/pdf)
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Related works:
Journal Article: Delaying the timing of offshoring low-skilled tasks (2010)
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