Tuesday, September 25, 2007

Outsourcing in Circles

Some of India's outsourcing firms are setting up shop outside India. Anand Giridharadas reports in the NY Times "Outsourcing Works, So India Is Exporting Jobs." Among the locations mentioned are the Czech Republic, Mexico, and the United States:
In a poetic reflection of outsourcing’s new face, Wipro’s chairman, Azim Premji, told Wall Street analysts this year that he was considering hubs in Idaho and Virginia, in addition to Georgia, to take advantage of American “states which are less developed.”


BGP said...

Do you think all this outsourcing will reduce the popularity of GDP and instead make GNP the more recognizable method for measuring economies?

Bill C said...

That's an interesting question. If Wipro has a US facility, the profits it sends back to India are subtracted from US GNP and added to India's. I'm not sure how big outsourcing is relative to the size of the economy (my guess is its not that huge), but in general we are seeing increased foreign ownership of US businesses due to the current account deficit. That means more income payments to the rest of the world. In the past, US GNP has exceeded GDP, but that is likely to change in the future.
I'm don't personally that makes one measure better than the other, but if there is a bigger difference between the two due to international factor payments, it becomes more important to understand the differences in what GNP and GDP mean.

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