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International oligopoly, barriers to outsourcing and domestic employment

Author

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  • Subhayu Bandyopadhyay
  • Sugata Marjit
  • Lei Yang

Abstract

In this paper we analyze the impact of barriers to outsourcing on domestic employment in an oligopolistic context. We show that although an outsourcing tax makes domestic labour cheaper, its employment effect is ambiguous due to strategic considerations. Analyzing international policy interdependence, we also show that, although a unilateral tax (subsidy) by a country must raise its domestic employment, this may be counterproductive in a Nash policy equilibrium. Finally, both a credit crisis and increased product differentiation tend to worsen the employment effects of an outsourcing tax. Our central findings are robust to both Bertrand and Cournot modes of competition. Oligopole international, barrières à la sous‐traitance et emploi domestique. Dans ce texte, on analyse l'impact des barrières à la sous‐traitance sur l'emploi domestique dans un contexte oligopolistique. On montre que, même si une taxe sur la sous‐traitance rend la main d'œuvre locale moins coȗteuse, son effet sur l'emploi est ambigu à cause de considérations stratégiques. À l'aide d'une analyse de l'interdépendance internationale des politiques, on montre que, même si une taxe unilatérale par un pays (ou une subvention) doit accroître le niveau d'emploi local, ce peut être contre‐productif dans un équilibre des politiques à la Nash. Finalement, à la fois une crise de crédit et un accroissement de la différenciation des produits peuvent empirer les effets sur l'emploi d'une taxe sur la sous‐traitance. Les résultats principaux sont robustes à la fois dans des contextes de concurrence à la Cournot et à la Bertrand.

Suggested Citation

  • Subhayu Bandyopadhyay & Sugata Marjit & Lei Yang, 2014. "International oligopoly, barriers to outsourcing and domestic employment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(4), pages 1372-1386, November.
  • Handle: RePEc:wly:canjec:v:47:y:2014:i:4:p:1372-1386
    DOI: 10.1111/caje.12111
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    Cited by:

    1. Sugata Marjit & Suryaprakash Mishra, 2023. "Credit market imperfection, lack of entrepreneurship and capital outflow from a developing economy," Review of Development Economics, Wiley Blackwell, vol. 27(3), pages 1855-1873, August.
    2. Sugata Marjit & Moushakhi Ray, 2020. "Asset Level Heterogeneity, Competition and Export Incentives: The Role of Credit Rationing," CESifo Working Paper Series 8208, CESifo.
    3. Sugata Marjit & Suryaprakash Mishra, 2020. "Credit Market Imperfection, Lack of Entrepreneurs and Capital Outflow from a Developing Economy," CESifo Working Paper Series 8515, CESifo.
    4. Marjit, Sugata & Ray, Moushakhi, 2021. "Competition, asset build up and export incentives: The role of imperfect credit market," Journal of Asian Economics, Elsevier, vol. 77(C).
    5. Marjit, Sugata & Das, Gouranga G., 2023. "Where have all Tech Layoffs gone? A Model of Two Worker Types with Outsourcing," GLO Discussion Paper Series 1338, Global Labor Organization (GLO).
    6. Sugata Marjit & Lei Yang, 2017. "Trade, Inequality and Distribution-Neutral Fiscal Policy- An Elementary Framework," Discussion Papers Series 582, School of Economics, University of Queensland, Australia.
    7. Sugata Marjit & Suryaprakash Misra & Dyuti S Banerjee, 2017. "Technology improvement and market structure alteration," Economics Bulletin, AccessEcon, vol. 37(2), pages 1106-1112.
    8. Sugata Marjit & Gouranga G. Das, 2023. "Where Have All Tech Layoffs Gone? A Model of Two Worker Types with Outsourcing," CESifo Working Paper Series 10686, CESifo.
    9. Sugata Marjit & Suryaprakash Mishra & Sandip Sarkar & Lei Yang, 2019. "Trade, Inequality and Distribution-neutral Fiscal Policy," Foreign Trade Review, , vol. 54(2), pages 61-74, May.
    10. Hamid Beladi & Sugata Marjit & Xinpeng Xu & Lei Yang, 2016. "Strategic Enforcement, Intellectual Property Rights, And Contractual R&D," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1904-1917, October.
    11. Sugata Marjit & Noritsugu Nakanishi, 2023. "The wage fund theory and gains from trade in a dynamic Ricardian model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 879-897, December.
    12. Marjit, Sugata, 2016. "Anti-Trade Agitation and Distribution-Neutral Tax Policy- An Elementary Framework," MPRA Paper 73110, University Library of Munich, Germany.

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