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International oligopoly, barriers to outsourcing and domestic employment
Author(s) -
Bandyopadhyay Subhayu,
Marjit Sugata,
Yang Lei
Publication year - 2014
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12111
Subject(s) - outsourcing , oligopoly , cournot competition , subsidy , context (archaeology) , economics , product differentiation , bertrand competition , competition (biology) , labour economics , business , international economics , microeconomics , market economy , paleontology , ecology , marketing , biology
In this paper we analyze the impact of barriers to outsourcing on domestic employment in an oligopolistic context. We show that although an outsourcing tax makes domestic labour cheaper, its employment effect is ambiguous due to strategic considerations. Analyzing international policy interdependence, we also show that, although a unilateral tax (subsidy) by a country must raise its domestic employment, this may be counterproductive in a Nash policy equilibrium. Finally, both a credit crisis and increased product differentiation tend to worsen the employment effects of an outsourcing tax. Our central findings are robust to both Bertrand and Cournot modes of competition.