Reading Summary The Muddles Over Outsourcing

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The Muddles Over Outsourcing
The article by Bhagwati, Panagariya and Srinivasan focus on the growing issue of outsourcing services, which has sparked a heated debate in the U.S. The authors state that outsourcing has been a common practice in the U.S for several decades, with companies purchasing goods that from other manufacturers to use in their production, either via fax, telephone or online (Bhagwati, Panagariya & Srinivasan, 2014). However, recently, companies in the U.S have been outsourcing services from abroad as well. This system has been facilitated by the technological advancements, and as a result, a majority of American citizens are worried that the trend might lead to more jobs being offered to individuals abroad that within. In light of this, the authors seek to investigate the main question of; to what extent has outsourcing affected the wages, jobs, and welfare of the U.S citizens. The method used by the authors involves analyzing the situation based on three alternative models, which capture various aspects of trade in services. These models are based on the Mode 1 services established by the World Health Organization (Bhagwati, Panagariya & Srinivasan, 2014). The first model is a one-good model which uses one final good and two factor production. The second model incorporates two goods and three factors, and allows for conventional trade. Whereas, the third has three goods and two factors and allows whereby the third non-traded good can be sold online. Based on the analysis, the authors conclude that offshore outsourcing of services does not have a significant impact on the U.S labor market. Moreover, the authors state that the outsourcing of services is similar to outsourcing trade, which in turn, has a positive influence on trade and national income.
Offshoring: The Next Industrial Revolution
Blinder’s article discusses the controversial issue of offshoring from rich countries to poor. The article closely focuses on the unfolding of events in the trade and manufacturing sector since the first industrial revolution, and how such events have shaped the current situation in most countries. Blinder begins by presenting the controversial statement made by Gregory Mankiw in 2004, who claimed that offshoring is “the latest manifestation of the gains from trade that economists have talked about at least since Adam Smith. ... More things are tradable than were tradable in the past, and that's a good thing” (Blinder 2006, p. 113). To determine the relevance of this statement, the author examines the current trends in the global environment that have facilitated the growth of offshoring. The author claims that the trade system has changed from the previous which divided goods and services into tradable and non-tradable. In this modern age, goods and services do not necessarily need to fit inside a box to be traded internationally, and this has encouraged the transfer of services electronically as well. Blinder refers to events from the industrial revolution to demonstrate how the shift in jobs has affected the U.S economy and the outside world as well. The trend from manufacturing to services experienced ...