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The Labour Market Effects of Outsourcing Parts and Components: A Simple Model with Cournot Competition
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Aussenwirtschaft
- Article date:
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June 1, 2008
- Author:
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Copyright informationCopyright Hochschule St. Gallen für Wirstchafts- und Socialwissenschaften Jun 2008. Provided by ProQuest LLC. (Hide copyright information)
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The paper analyses a partial equilibrium outsourcing model with Cournot competition in intermediate good production. Final production is located in Western Europe, whereas the intermediate good can be manufactured by a Western (outsourcing) or Eastern European supplier (offshore outsourcing). The paper asks the question how changes in production costs, in particular wages, affect labour input in the two regions in the presence of Cournot competition. The main results are: higher production costs in one region reduce intermediate good production in both regions leading to a substitution effect between high- and low-skilled labour intensive inputs rather than between Eastern and Western ...
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