title: Informal Labor Regulations, Firm Boundaries, and Global Sourcing
abstract: This paper extends the global sourcing model with informal labor, which spawns reputation and legal costs for violating the rules and regulations imposed on foreign firms regarding accessing informal labor under integration. Under these circumstances, foreign firms, facing a higher cost than domestic firms, prefer to outsource rather than integrate into the informal labor-abundant country under both transaction-cost and property-rights theory approaches. The attractiveness of foreign investment 