%0 Report
        %A Bandyopadhyay, Subhayu
%A Basu, Arnab K.
%A Chau, Nancy H.
%A Mitra, Devashish
        %T Disentangling the Wage Impacts of Offshoring on a Developing Country: Theory and Policy
        %D 2016
        %8 2016 May
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 9973
        %U https://www.iza.org/publications/dp9973
        %X The various channels through which a reduction in the cost of offshoring can improve wages in a developed country are by now well understood. But does a similar reduction in the offshoring cost also benefit workers in the world's factories in developing countries? Using a parsimonious two-country model of offshoring we find very nuanced results. These include cases where wages monotonically improve or worsen as well as those where wages exhibit an inverted U-shaped relationship in response to parametric reductions in the cost of offshoring. We identify qualitative conditions under which wages and welfare increase or decrease in the developing world as a result of a reduction in offshoring costs. Since global welfare always rises with an improvement in offshoring technology, we find that there is a role for a wage tax or a minimum wage in the developing country. We derive the optimal levels of such policies.
        %K wages
%K international offshoring
%K wage tax
%K minimum wage