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Offshoring to a Developing Nation with a Dual Labor Market

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  • Subhayu Bandyopadhyay
  • Arnab K. Basu
  • Nancy H. Chau
  • Devashish Mitra

Abstract

We present a model of offshoring of tasks to a developing nation characterized by a minimum-wage formal sector and a flexible-wage informal sector. Some offshored tasks are outsourced by the formal sector to the lower-wage informal sector.

Suggested Citation

  • Subhayu Bandyopadhyay & Arnab K. Basu & Nancy H. Chau & Devashish Mitra, 2020. "Offshoring to a Developing Nation with a Dual Labor Market," Review, Federal Reserve Bank of St. Louis, vol. 102(3), pages 237-253, July.
    • Handle: RePEc:fip:fedlrv:88592
    DOI: 10.20955/r.102.237-53
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    References listed on IDEAS

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    1. Deborah Goldschmidt & Johannes F. Schmieder, 2017. "The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(3), pages 1165-1217.
    2. Asha Sundaram, 2015. "The Impact of Trade Liberalization on Micro Enterprises: Do Banks Matter? Evidence from Indian Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(6), pages 832-853, December.
    3. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    4. Subhayu Bandyopadhyay & Arnab K. Basu & Nancy H. Chau & Devashish Mitra, 2020. "Consequences Of Offshoring To Developing Nations: Labor‐Market Outcomes, Welfare, And Corrective Interventions," Economic Inquiry, Western Economic Association International, vol. 58(1), pages 209-224, January.
    5. Asha Sundaram & Reshad Ahsan & Devashish Mitra, 2012. "Complementarity between Formal and Informal Manufacturing in India: The Role of Policies and Institutions," Working Papers 1116, School of International and Public Affairs, Columbia University, revised Apr 2012.
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    JEL classification:

    • F1 - International Economics - - Trade

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