PS2 - Siddharth Joshi Global Econ 8a Economics Problem Set...

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Unformatted text preview: Siddharth Joshi Global Econ 8a Economics Problem Set 1 1) a.According to Marglins article, outsourcing leads to different groups of people winning and different groups of people losing. Outsourcing is. Due to outsourcing, workers in lower wage countries are provided with employment and better technology to work with. These workers are winners for many reasons; firstly their wages go up as the amount the produce and price of final product both increase. They also are provided with high-end technology, so through training and experience with good technology, their skill level goes up and their worth as a worker goes up. Other winners are owners and shareholders of high-end technology/companies in countries with high wages gain from outsourcing. There is a huge cost reduction from using low-wage labour and therefore profits increase. Further, it could be possible that lower wage labour with less opportunities work harder and have less higher end demands such as benefits and other such worker related expenses. When moving production to countries with lower wages, it is often that these countries also have lower regulations and production costs go down further. The obvious losers from outsourcing are workers in high wage countries in lower and middle skilled jobs whos jobs are outsourced to other countries. They say that leisure is traded, but sometimes this leisure is not wanted, and instead of leisure people end up losing their jobs completely to lower wage labourers in different countries. Another group of losers are the societies of low-wage workers . These are generally societies who are suddenly impacted by Western technology, society and the negative forces of globalization. Often the externalities greatly hurt the societies. The Heckscher-Ohlin theory says that if you trade something produced from factors that are more abundant in your country than in other countries then you shall gain from trade. In high technology fields, outsourcing causes this not to be true. If high skilled labour is more abundant in country A than in country B, then according to the Heckscher-Ohlin theorem labourers in country A producing high technology, high skill level products should gain from trade. With outsourcing, and the ability to transfer these jobs to lower wage workers in country B, this actually lowers the income of those labourers in country A, causing them to lose out.income of those labourers in country A, causing them to lose out....
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This note was uploaded on 04/17/2008 for the course ECON 8b taught by Professor Zamb during the Spring '08 term at Brandeis.

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PS2 - Siddharth Joshi Global Econ 8a Economics Problem Set...

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