Narrow Results

This paper examines various economic issues on offshoring (international outsourcing). It begins with a discussion of the factors that determine a firm's decision to offshore and illustrates, with simple models, the cost saving of offshoring certain stages of production and the advantages of specializing in some input production and engaging in input trade. The paper then examines the recent trend in offshoring with special emphases on the rise of IT offshoring and the characteristics of firms engaging in offshoring and exporting. The effect of offshoring and national welfare is then discussed in light of numerous results in recent empirical studies. Finally, after examining the current US programs to aid the displaced workers, the paper discusses various short-run and long-run policy proposals to alleviate the negative impacts of offshoring.