This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Journal: Microeconomics: Vol. 3 No. 2 (May 2011)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)

Explore:

AEJ: Micro - All Issues

AEJ: Micro Forthcoming Articles

A Theory of Outsourcing and Wage Decline

Article Citation

Holmes, Thomas J., and Julia Thornton Snider. 2011. "A Theory of Outsourcing and Wage Decline." American Economic Journal: Microeconomics, 3(2): 38-59.

DOI: 10.1257/mic.3.2.38

Abstract

This paper develops a theory of outsourcing in which the circumstances under which factors of production can grab rents play the leading role. One factor has monopoly power (call this labor) while a second factor does not (call this capital). There are two kinds of production tasks: labor-intensive and capital-intensive. We show that if frictions limiting outsourcing are not too large, in equilibrium labor-intensive tasks are separated from capital-intensive tasks into distinct firms. When a capital-intensive country is opened to free trade, outsourcing increases and labor rents decline. A decrease in outsourcing frictions lowers labor rents. (JEL J31, L22, L24)

Article Full-Text Access

Full-text Article

Additional Materials

Online Appendix (94.55 KB)

Authors

Holmes, Thomas J. (U MN and Federal Reserve Bank of Minneapolis)
Snider, Julia Thornton (UCLA)

JEL Classifications

J31: Wage Level and Structure; Wage Differentials
L22: Firm Organization and Market Structure
L24: Contracting Out; Joint Ventures; Technology Licensing

Comments

View Comments on This Article (0) | Login to post a comment


American Economic Journal: Microeconomics


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AEJ: Micro - All Issues

AEJ: Micro - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us