The Trouble with Offshoring: Static and Dynamic Losses in the Presence of Unemployment
AbstractThis paper provides theoretical support for the popular objection to offshoring, whereby firms at home employ services of labor located abroad. In the presence of unemployment, our analysis highlights welfare losses from offshoringânot only for the static case of a fixed stock of capital, but also for the dynamic one of optimal saving and investment. We compare these static and dynamic losses to the gains that would instead arise under full-employment conditions, assumed by most of the theoretical literature on offshoring. Our results suggest that public concerns over offshoring are justified when unemployment is taken explicitly into account.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The World Economy.
Volume (Year): 36 (2013)
Issue (Month): 1 (01)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920
Other versions of this item:
- Richard A. Brecher & Zhiqi Chen & Zhihao Yu, 2010. "The Trouble with Offshoring: Static and Dynamic Losses in the Presence of Unemployment," Carleton Economic Papers 11-02, Carleton University, Department of Economics, revised 15 Mar 2011.
- F20 - International Economics - - International Factor Movements and International Business - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Outsourcing Peter To Pay Paul: High-Skill Expectations And Low-Skill Wages With Imperfect Labor Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 12(04), pages 463-479, September.
- Richard Brecher & Zhiqi Chen, 2008.
"Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing,"
Carleton Economic Papers
08-07, Carleton University, Department of Economics, revised Nov 2010.
- Richard A. Brecher & Zhiqi Chen, 2010. "Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 990-1000, November.
- Mitra, Devashish & Ranjan, Priya, 2007.
"Offshoring and Unemployment,"
IZA Discussion Papers
2805, Institute for the Study of Labor (IZA).
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