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Why do they just do it? A theory of outsourcing and working conditions

Alejandro Donado

MPRA Paper from University Library of Munich, Germany

Abstract: Nike and other companies have long been criticized for outsourcing their production to contract factories with dismal working conditions. Despite the overwhelming amount of interest, there exists no theory for studying this topic. The current paper fills this gap. In the model, the most productive firms in the North make high profits and outsource their manufacturing production to contract factories in the South. Factories pay wages that can compensate for poor working conditions, but these wages might not meet workers' basic needs. The paper studies an extension under which factory workers are not appropriately compensated for inferior working conditions.

Keywords: Outsourcing; working conditions; compensating wage differentials; labor standards; subcontracting; Nike; sweatshop (search for similar items in EconPapers)
JEL-codes: F12 F16 F23 F66 J31 J81 J83 (search for similar items in EconPapers)
Date: 2020-12-08
New Economics Papers: this item is included in nep-lma
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