Outsourcing is generally conducted for the benefit of the individual firm, but often creates negative outcomes for the economy at large. The best way to understand the economic issues surrounding outsourcing is to understand the economic tradeoffs at play. Two case studies will help in fostering this understanding. Fishman discusses the experiences of Wal-Mart suppliers, struggling to compete in a global marketplace. Friedman discusses some of the non-economic factors involved in outsourcing, looking at the issue from the other side of the ocean.

Wal-Mart is often criticized for outsourcing American jobs, Fishman notes, and he presents evidence that it does facilitate this practice. Wal-Mart's mission is to offer low prices to customers as a matter of competitive policy, and do to this is must find goods from the lowest-cost producers. Given the factor input costs in the United States, this usually means outsourcing production to low-cost countries, where the prices...
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