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Title: Entrepreneurial Networking, International Outsourcing and Wage Inequality
Keywords: Entrepreneurial ability, networks, international outsourcing, wage inequality, employment, growth
Issue Date: 26-Jan-2007
Citation: KOH PHUAY LENG (2007-01-26). Entrepreneurial Networking, International Outsourcing and Wage Inequality. ScholarBank@NUS Repository.
Abstract: We construct a simple dynamic model for a small, developed and open economy where the equilibrium organization of firms changes due to the formation of networks among domestic firms that undertake vertical integration and outsourcing respectively. Such networks lead to the growth of two stocks: integrated productivity and network knowledge stocks. These have spillover effects on the domestic economy in the following period. There exists a unique threshold level of entrepreneurial ability below (above) which firms elect to do vertical integration (international outsourcing). We show that a reduction in the cost of manual components, an increase in foreign human capital and efficiency of matching firms with overseas supplier will increase outsourcing activities and subsequently affect wage inequality. We also discuss the welfare consequences of different outcomes with respect to changes in each exogenous parameters and find that an increase in outsourcing activities is not necessary beneficial to the domestic economy.
Appears in Collections:Master's Theses (Open)

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