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International outsourcing, carbon leakage and employment leakage

Author

Listed:
  • José Manuel Rueda-Cantuche
  • Kurt Kratena

Abstract

This paper deals with the impact of outsourcing from the EU27 to high and low income countries (defined as aggregates from the WIOD database) on employment demand and simultaneously on energy demand and air emissions. The analysis is based on a model of production (Translog cost function and factor demand), allowing for factor biased technical change and different regional sourcing structures of imported intermediates. The impact on employment as well as on energy/environment is determined by a pure substitution effect as well as by a cost saving effect of outsourcing.Different ways of linking this production block model to an input-output model are described in order to derive also the indirect effects of outsourcing on employment and energy/environment. The analysis reveals how the historical trends in integration have contributed to outsourcing and how this in turn has led to employment and energy/environment impacts. The simultaneous impact of policies that increase energy (carbon) prices on carbon and employment leakage can also be shown.

Suggested Citation

  • José Manuel Rueda-Cantuche & Kurt Kratena, 2012. "International outsourcing, carbon leakage and employment leakage," EcoMod2012 4215, EcoMod.
    • Handle: RePEc:ekd:002672:4215
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