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Two-Way Outsourcing, International Migration, and Wage Inequality

Author

Listed:
  • Morihiro Yomogida

    (Faculty of Economics, Sophia University, Japan)

  • Laixun Zhao

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

This paper develops a general equilibrium model with a vertical production structure to examine the relationship between offshore outsourcing and international migration,especially emphasizing their effects on the wages of skilled and unskilled workers. Two-way outsourcing (simultaneous insourcing and outsourcing) in skilled-labor intensive services arises due to product differentiation and scale economies, and outsourcing in unskilled-labor intensive processing occurs because of factor endowment differences. The tractability of the model allows us to rank outsourcing and migration, according to the wages of both types of workers. Finally, we also analyze under what conditions outsourcing and international migration are complements or substitutes.

Suggested Citation

  • Morihiro Yomogida & Laixun Zhao, 2009. "Two-Way Outsourcing, International Migration, and Wage Inequality," Discussion Paper Series 241, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:241
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp241.pdf
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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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