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Title:Outsourcing, public Input provision and policy cooperation PDF Logo
Authors:Aronsson, Thomas
Koskela, Erkki
Issue Date:2009
Series/Report no.:CESifo working paper 2886
Abstract: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.
Subjects:outsourcing
redistribution
public input goods
asymmetric information
JEL:H21
H25
J31
J62
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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