The Relationship between International Outsourcing and Bargained Wage: A Revisit

Abstract

This article revisits the debate in the literature of outsourcing and bargained wage. We focus on the triggers of international outsourcing. If the triggers are a decrease in foreign per-unit cost and an improvement in foreign workers’ productivity, the effect of international outsourcing on the domestic bargained wage is always positive. Under certain conditions, a deterioration in domestic workers’ productivity and a decrease in the degree of product differentiation, which lead to an increase in international outsourcing, decreases bargained wages. It is important to know what raises the intensity of international outsourcing in the debate.