Outsourcing Winners and Losers
By Arnold Kling
When you open up trade opportunities, will the benefits go to people with high incomes or people with low incomes? Brad DeLong walks through the logic that says that if foreigners have a comparative advantage in high-income occupations (such as computer programming), this will be of more benefit to low-income U.S. workers than if the other country’s comparative advantage is in low-skill work.
In this context, it is interesting that the journalistic upset about outsourcing appears to arise because of the impression that foreigners are competing with the relatively rich–radiologists, programmers, et cetera. I believe that we should worry a lot more about outsourcing if it puts downward pressure on the salaries of the working class than if it puts downward pressure on the incomes of the yuppie class. But that’s not what’s in the journalistic zeitgeist.
My sense is that the journalistic zeitgeist is that all economic phenomena must be put in a negative light. This is always the case, but it seems to be particularly urgent with a Republican in the White House.
Read Brad’s full post for a nice example of general equilibrium modeling.
For Discussion. While outsourcing grabs much of the ink, what are the economic stories that are being under-reported?