EconPapers    
Economics at your fingertips  
 

Disentangling the Wage Impacts of Offshoring on a Developing Country: Theory and Policy

Subhayu Bandyopadhyay (), Arnab Basu (), Nancy Chau () and Devashish Mitra ()

No 9973, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The various channels through which a reduction in the cost of offshoring can improve wages in a developed country are by now well understood. But does a similar reduction in the offshoring cost also benefit workers in the world's factories in developing countries? Using a parsimonious two-country model of offshoring we find very nuanced results. These include cases where wages monotonically improve or worsen as well as those where wages exhibit an inverted U-shaped relationship in response to parametric reductions in the cost of offshoring. We identify qualitative conditions under which wages and welfare increase or decrease in the developing world as a result of a reduction in offshoring costs. Since global welfare always rises with an improvement in offshoring technology, we find that there is a role for a wage tax or a minimum wage in the developing country. We derive the optimal levels of such policies.

Keywords: wage tax; international offshoring; wages; minimum wage (search for similar items in EconPapers)
JEL-codes: F11 F13 F16 F66 O19 O24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2016-05
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://ftp.iza.org/dp9973.pdf (application/pdf)

Related works:
Working Paper: Disentangling the Wage Impacts of Offshoring On a Developing Country: Theory and Policy (2016) Downloads
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:iza:izadps:dp9973

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().

 
Page updated 2019-10-19
Handle: RePEc:iza:izadps:dp9973