The Economics of Outsourcing

According to Research Associate Thomas I. Palley, global outsourcing represents a new economic challenge that calls for a new set of institutions. Palley expands upon the problems of offshore outsourcing as outlined in Public Policy Brief No. 86 and focuses on the microeconomic foundations. He argues that outsourcing is a central element of globalization that is best understood as a new form of competition. Palley urges policymakers to understand the economic basis of outsourcing in order to develop effective policies, and suggests that they focus on enhancing national competitiveness and establishing new rules that govern the nature of global competition.