Outsourcing, Public Input Provision and Policy Cooperation

Research, Preprint OPEN
Aronsson, Thomas ; Koskela, Erkki (2009)
  • Publisher: Institute for the Study of Labor (IZA) Bonn
  • Subject: Verteilungspolitik | Infrastruktur | Wohlfahrtseffekt | asymmetric information | J31 | redistribution | Nord-Süd-Beziehungen | Offshoring | Outsourcing; redistribution; public input goods; asymmetric information | H21 | Internationale wirtschaftspolitische Koordination | J62 | Zwei-Länder-Modell | H25 | Öffentliches Gut | public input goods | Outsourcing | outsourcing, redistribution, public input goods, asymmetric information | Theorie
    • jel: jel:H21 | jel:J62 | jel:J31 | jel:H25
      ddc: ddc:330
    acm: ComputingMilieux_THECOMPUTINGPROFESSION

This paper concerns public input provision as an instrument for redistribution under international outsourcing by using a model-economy comprising two countries, North and South, where firms in the North may outsource part of their low-skilled labor intensive production to the South. We consider two interrelated issues: (i) the incentives for each country to modify the provision of public input goods in response to international outsourcing, and (ii) whether international outsourcing justifies policy cooperation. If the public input good is substitutable for (complementary with) outsourcing in terms of the production function faced by northern firms, then outsourcing contributes to increase (decrease) the public input provision in the North. For the South, the optimal policy response depends on the level of outsourcing. We also show how policy cooperation with respect to public input provision can be designed to increase the overall social welfare.
  • References (32)
    32 references, page 1 of 4

    Aronsson, T. and Koskela, E. (2009a) Outsourcing and Optimal Nonlinear Taxation: A Note. Economics Letters 102, 135-137.

    Aronsson, T. and Koskela, E. (2009b) Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment, IZA Discussion Paper No. 4196, May, University of Bonn.

    Aronsson, T. and Koskela, E. (2009c) Optimal Income Taxation, Outsourcing and Policy Cooperation in a Dynamic Economy. Umeå Economic Studies no 784.

    Aronsson, T. and Wekhe, S. (2008) Public Goods, Unemployment and Policy Coordination. Regional Science and Urban Economics 38, 285-298.

    Egger, H. and Egger, P. (2006) International Outsourcing and the Productivity of LowSkilled Labor in the EU. Economic Inquiry 44, 237-258.

    Egger, H. and Falkinger, J. (2006): The Role of Public Infrastructure and Subsidies for Firm Location and International Outsourcing. European Economic Review 50, 1993- 2015.

    Ethier, W.J. (2005) Globalization, Globalisation: Trade, Technology and Wages. International Review of Economics and Finance 14, 237-258.

    Feehan, J.P. (1989) Pareto-Efficiency with Three Varieties of Public Input. Public Finance 44, 237-248.

    Feehan, J.P and Matsumoto, M. (2000) Productivity-enhancing Public Investment and Benefit Taxation: the Case of Factor-augmenting Public Inputs. Canadian Journal of Economics 33, 114-121.

    Feenstra, R.C. and Hanson, G.H. (1999) The Impact of Outsourcing and High-Technology Capital on Wages. Quarterly Journal of Economics 114, 907-940.

  • Metrics
    No metrics available
Share - Bookmark