Suppose the wage ratio of skilled labor v.s. unskilled labor, wH/wL, is highest in country A,...
Suppose the wage ratio of skilled labor v.s. unskilled labor, wH/wL, is highest in country A, intermediate in country B, and lowest in country C, and country C's production involves two stages/tasks, the skilled-labor intensive R&D and the unskilled-labor intensive components.
(a) To which country should country C offshore its component production so that country C's output is maximized?
(b) Use a PPF-indifference curve graph with components on the X axis and R&D on the Y axis to show the gains from offshoring for country C in the above case. In the graph, identify the amount of R&D exports and component imports.
(c) How will the gain from offshoring change if country C offshores its component production to the other foreign country?
(d) Please discuss some other effects of offshoring that are not reflected in the graph.
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Suppose the wage ratio of skilled labor v.s. unskilled labor,
wH/wL, is highest in country A,...
Consider a simplified offshoring model with two firms, Techland in home country and Prodland in foreign...
Consider a simplified offshoring model with two firms, Techland in home country and Prodland in foreign country, and two activities, Components and R&D. Components is low-skilled labor intensive whereas R&D is high-skilled labor-intensive. The final good produced is Mphone. The costs of capital and trade are uniform across production activities. The wage structure in Techland (T) and Prodland (P) for low- skilled labor (L) and high-skilled labor (H) is as follows: Home: WTL = 30,000, WTH = 90,000 and Prodland:...
Consider a simplified offshoring model with two firms, Techland in home country and Prodland in foreign...
Consider a simplified offshoring model with two firms, Techland in home country and Prodland in foreign country, and two activities, Components and R&D. Components is low-skilled labor intensive whereas R&D is high-skilled labor-intensive. The final good produced is Mphone. The costs of capital and trade are uniform across production activities. The wage structure in Techland (T) and Prodland (P) for low- skilled labor (L) and high-skilled labor (H) is as follows: Home: WIL = 30,000, WTH = 90,000 and Prodland:...
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Consider a simplified offshoring model with two firms, Techland in home country and Prodland in foreign country, and two activities, Components and R&D. Components is low-skilled labor intensive whereas R&D is high-skilled labor-intensive. The final good produced is Mphone. The costs of capital and trade are uniform across production activities. The wage structure in Techland (T) and Prodland (P) for low- skilled labor (L) and high-skilled labor (H) is as follows: Home: WTL = 30,000, WTH = 90,000 and Prodland:...
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Thank you so much.
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