Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
The purpose of this paper is to incorporate the currently mushrooming phenomenon of outsourcing into the standard two‐sector, two‐factor Heckscher–Ohlin model of international trade. We first show how outsourcing modifies a firm's production function, and then demonstrate that outsourcing generally raises the return to capital and lowers the real wage, although the nation's GDP rises in proportion to the value‐added in the outsourcing industry. Furthermore, the output of the outsourcing sector may actually fall even though its unit cost goes down; the output of the other sector then rises. By contrast, employment in the outsourcing sector may actually rise.