A Trade Theorist's Take On Skilled-Labor Outsourcing
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Overview: This research paper shows that this outsourcing, if the countries continue to diversify, causes the wage of unskilled labor in North to fall below that in South. Recent concern is of skilled-labor outsourcing, in which firms in the U.S. and other countries have drawn upon the services of skilled workers in developing countries for activities that they used to do. Motivated by this and the fact that such outsourcing would be hard to explain without technological differences, this paper explores theoretically a simple story of outsourcing in which factor proportions and technology interact across activities performed within industries or firms.