Companies decide to transfer their production facilities to developing countries where they find lower labor costs, so that production is more efficient there. Therefore, they will be able to commercialize their products at cheaper price, they will win larger market shares domestically and abroad and increase their profits.
The negative effect on developed countries is that the people who worked on the facilities closed before these were transfered abroad, turned to be unemployed. This creates important social distress, losses of purchasing power and lower domestic demand as many different sectors are affected.
