INTERNATIONAL OUTSOURCING AND WELFARE REDUCTION: AN ENTRY-DETERRENCE STORY

摘要

We show that international outsourcing may reduce welfare of the out-sourcing country by deterring market entry, thus showing a new effect which is different from the employment and the quality effects creating negative impacts of outsourcing. Entry deterrence under outsourcing reduces domestic welfare if both the profit extraction and cost saving from outsourcing are sufficiently small.