Interesting graph, even if I do not quite understand the math. What is not clear, is how much revenue was actually sent to India. Step #2 seems to imply it was $0.24 (Revenues + Taxes), step #3 implies that it was $0.42($1-Cost Savings of $.058). I do not know how to reconcile these. Moreover, the original definition of a $1 spent in US seems unclear - is that the salary? before or after taxes? Step #4 - Value from reemployed american worker is less than half of $1. Does that mean in order to increase the global pie we have to take a 55% salary cut? Why does not the graph include lost US federal and state revenue? Moreover, why does not it take the multiplier into the account? As I recall from my Economics class, US multiplier was incredibly high, somewhere around 5. I would imagine that India's multiplier is a lot lower, at best in the 3-4 range. Would not that change the results of the graph dramatically, at least as measured in absolute US Dollars?
Can someone enlighten me and point out my mistakes please?
Wednesday, October 22, 2003
Chart Focus: October 2003 - The Real Economics of off-shoring