Offshoring Production: A Simple Model Of Wages, Productivity, And Growth
AbstractWe examine the relationship between oÂ¤shoring and the labour market in an occupational choice model of trade and endogenous growth where workers are employed on the basis of their individual skill levels. Trade liberalization leads to oÂ¤shoring and reduces employment in the manufacturing sector. Displaced workers move into the traditional and innovation sectors ac- cording to their skill levels, shaping real wages and aggregate productivity in the manufacturing sector. The paper aims to show how inter-sectoral labour market adjustments, highlighted by skill heterogeneity, could be a possible explanation for the simultaneous rise in productivity and reduction in real wages that have coincided with the sharp escalation of oÂ¤shoring activities in the US manufacturing sector since 2004.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 49 (2011)
Issue (Month): 2 (04)
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Other versions of this item:
- Colin Davies & Alireza Naghavi, 2008. "Offshoring Production: A Simple Model of Wages, Productivity, and Growth," Center for Economic Research (RECent) 027, University of Modena and Reggio E., Dept. of Economics.
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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