An Economic Analysis of �Outsourcing� by : Vipin Manuel Prepared for ECO 500 FALL 2004 Dated: 15th December 2004 Outsourcing can be termed as shifting of major functions (production, back office processing and call centers) of a firm from one area to other which in return gets them more profit. Usually large firms base their head offices in developed countries and operate their productions from other developing countries where they can produce the goods at a cheaper cost. One of the main reasons for outsourcing of jobs from US to other developing countries like China and India is the low cost of production due to cheap labor available which in turn reduces the variable costs (6) involved. Some economists look upon it as a threat to US while others think of it as a way for its progress. The outsourcing of jobs from United States of America is becoming a major threat to the American economy. Despite the substantial benefits of outsourcing, the increase in unemployment and the economy decline causes a major concern to the US government. B....

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