Outsourcing

An Evaluation Of The Employment Effects Of Barriers To Outsourcing

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Executive Summary

Barriers to outsourcing that are being currently implemented in the US effectively tax its companies who "Export" jobs through outsourcing. The objective is to raise domestic employment. Given that many of the important international markets where the US has a comparative advantage feature non-atomistic firms, they evaluate the implications of such policies in an oligopolistic context. They find that while an outsourcing tax favors domestic workers by causing firms to switch to a greater use of domestic sources (the substitution effect), the loss in international competitiveness has a negative volume effect (the output effect), which pulls in the other direction.

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