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Preliminary Draft Outsourcing and Job Loss: A protectionist fallacy ∗Rajeev AhujaEmail: rajeev@icrier.res.in Abstract Besides providing a perspective on the effects of outsourcing on jobs in the developed countries, we demonstrate that the effects of outsourcing at firm or industry level is far from clear. In particular, we derive conditions under which outsourcing may lead to increase in jobs at a firm or industry level. 1. Introduction Trade in many services hitherto considered non-tradable, is made possible by the developments in communication technology that are fast blurring the boundary between goods and services. As a result, there has been an increasing trend towards trade in services. Outsourcing that refers to out-migration of a business activity or a process, is a part of a broader trend towards the global delivery and sourcing of services from best suppliers, wherever they are located. Outsourcing of raw materials and standardised intermediate goods observed in the manufacturing sector in the 80s and 90s is now being 1witnessed in the services sector too. Business process outsourcing (BPO) refers to out-migration of non-manufacturing (services) activities. The key driver of BPO is, of course, cost reduction due to cheaper communication and lower wages in the developing countries. Cheaper communication is prompting companies to move their labour intensive service jobs, popularly called back office operations, such as data ...