Premium
INTERNATIONAL OUTSOURCING AND WELFARE REDUCTION: AN ENTRY‐DETERRENCE STORY
Author(s) -
MUKHERJEE ARIJIT,
TSAI YINGYI
Publication year - 2010
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2009.02152.x
Subject(s) - outsourcing , welfare , profit (economics) , deterrence theory , knowledge process outsourcing , consumer welfare , economics , business , barriers to entry , industrial organization , microeconomics , market structure , market economy , marketing , physics , nuclear physics
We show that international outsourcing may reduce welfare of the outsourcing 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.