Long Run Outsourcing.

In an article I read, South Korea signed a deal to outsource to the U.S. I thought why outsource to the U.S.? Outsourcing is for reducing costs by getting cheaper labor. After I read an outsourcing blog by Vincent, I came up with a theory of the future of outsourcing. The original outsourced country will benefit from increased revenue, wages will go up, and eventually start to outsource to cheaper countries. This goes on until ultimately, the cheapest country should get all the work; but also will get a lot of the world’s money. The standard of living will go up, wages will rise, and they will start to outsource to other countries. As technology and education reaches every country, wages will be increased to a world equilibrium. In the long run, the benefits for outsourcing will drop to zero.


Dr. Tufte said...

This is a thing of beauty.

For an undergraduate non-major, this is a stunning run through of how a real economist thinks, and the sort of conclusions they come to.


Ralph said...

Thank you, Dr. Tufte, I thought about it for a many of days! But I thought my reasoning was not realistic, but true in theory. What do you think?