| Forthcoming in revised form: The Journal of Economic Perspectives) (2008) | |||||||||||||
Abstract | |||||||||||||
| Note: Readers who are not theoretically inclined may skip Section III without loss of continuity. Critics have muddled the public debate over offshore outsourcing by using the term interchangeably to refer to altogether different phenomena such as on-line purchase of services, direct foreign investment and, sometimes, all imports. We argue that clarity requires distinguishing among these various phenomena and define outsourcing explicitly as the services trade at arm's length that does not require geographical proximity of the buyer and the seller—the so-called Mode 1 services in the WTO terminology— conducted principally via the electronic mediums such as the telephone, fax and Internet. The definition is appropriate because this is the phenomenon that is relatively new and scary in public consciousness and has fueled the recent “outsourcing ” debate. Under this definition, the total number of the U.S. jobs outsourced annually is minuscule and is expected to remain so over the next decade, even on a gross basis (i.e., without adjusting for the jobs in-sourced to the U.S.). The fears that offshore outsourcing will lead to highvalue | |||||||||||||
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