The consumer: Does the consumer benefit? Are prices lowered by outsourcing? Why or why not? Efficiency and productivity: Does outsourcing enhance efficiency and productivity? Why or why not? Competition: Does outsourcing encourage competition? Is this a good thing? Why or why not? Developing countries: Does outsourcing benefit developing countries? Why or why not? International stability: Does outsourcing foster international cooperation, respect, and stability? Why or why not?

Are prices lowered by outsourcing?

Most of the time they are. The main incentive for companies to outsource production to other countries is to lower costs. For example, many clothing manufacturers outsource their production to low-wage countries such as Bangladesh and Vietnam because by paying lower wages, they reduce costs, and as a result, can charge lower prices to the final customers.

Does outsourcing enhance efficiency and productivity?

According to most international trade theories, it does. When firms are allowed to freely allocate their resources around the world, they can use each country's comparative advantages to enchance efficiency and productivity.

For example, Apple designs its products in the U.S. where there is a highly skilled labor force, but manufactures them in East Asia where the labor force is not as skilled, but is cheaper. The final result is more efficient than if Apple did both things in the same country.

Does outsourcing encourage competition?

Outsourcing encourages competition because it lower the prices of goods, and enhances efficiency. It discourages cartelization, collusion, and the formation of monopolies or oligopolies (they still can form anyway).

Is this a good thing?

According to economic theory, competition is a good thing because it benefits the final consumer by driving prices down, while improving the quality of the goods and services.

Does outsourcing benefit developing countries?

Outsourcing benefits developing countries because it allows the entry of investments that would otherwise be kept in developed countries.

As the examples above, Bangladesh benefits from the investments of clothing manufacturers from first world countries such as Nike or Prada, while China benefits from the investment of tech companies such as Apple or Intel.

These investments create jobs, know-how, capital flows, and can result in the development of domestic competitors in the developing nations.

Does outsourcing foster international cooperation, respect, and stability?

Outsourcing fosters international cooperation because it links countries together with closer economic ties that make it harder for nation to not cooperate.

Because of common economic interests, nations are likely to cooperate, and less likely to engange in conflict. In fact, the European Union, one of the most integrated regions in the world, was born for this reason: to prevent war from erupting by linking the countries economies together.

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