Re-create Figure 11.6.
(a) Shade in the area of the diagram indicating total national income (without offshoring), distinguishing income to multinational firms, non multinational firms, and workers.
(b) Now, modify the diagram as in Figure 11.7 to show the effects of offshoring with substitutable labor. Again, shade in the diagram to show total national income, distinguishing between income to multinational firms net of payments to domestic and foreign workers, income to non-multinational firms net of payments to domestic workers, and income to domestic workers.
In figure 11.7

(c) Can you tell from these diagrams whether national income has gone up or down as a result of offshoring? Show the change in national income in the diagram.

Transcribed Image Text:

Multinationals' labor demand Non-Multinationals labor demand LF IM