Holmes, Thomas J.; Snider, Julia Thornton - Federal Reserve Bank of Minneapolis - 2009
We develop a theory of outsourcing in which there is market power in one factor market (labor) and no market power in a … show there is always outsourcing in the market allocation when a friction limiting outsourcing is not too big. The key …. Wages fall when outsourcing increases in response to a decline in the outsourcing friction. …