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Outsourcing, Unemployment and Welfare Policy

version abrégée The paper investigates the consequences of outsourcing of labor intensive activities to low-wage economies. This trend challenges the two basic functions of the welfare state, redistribution and social insurance when private unemployment insurance markets are missing. The main results are: (i) outsourcing raises unemployment and labor income risk of unskilled workers; (ii) it increases inequality between high- and low-income groups; and (iii) the gains from outsourcing can be made Pareto improving by using a redistributive linear income tax if redistribution is initially not too large. We finally derive the welfare optimal redistribution and unemployment insurance policies.
   
Genre Journal paper
   
mot-clé Outsourcing, unemployment, social insurance, redistribution
   
langue English
kind of paper journal article
date de sortie de la publication 5-2-2009
journal Journal of International Economics
maison d'édition Elsevier (Amsterdam)
ISSN 0022-1996
émission du journal 78
numéro du journal 1
page(s) 168-176
Review pas de Review
   
citation Keuschnigg, C., & Ribi, E. (2009). Outsourcing, Unemployment and Welfare Policy. Journal of International Economics, 78(1), 168-176.