International Outsourcing in a Two-Sector Heckscher-Ohlin Model

International Outsourcing in a Two-Sector Heckscher-Ohlin Model

This paper analyzes the distributional effects of international outsourcing in a two sector Heckscher-Ohlin type model if both sectors get economical access to cost-saving international outsourcing. Thereby, it is shown that if both sectors are engaged in international outsourcing in equilibrium, the cost-saving effects of outsourcing as well as the factor contents of the outsourced fragments are relevant for the factor price effects. Concerning the Pareto-criterion the main finding is that a Pareto-improving factor price impact of international outsourcing cannot be excluded from a theoretical point of view.