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Offshoring and unemployment: The role of search frictions labor mobility

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  • Mitra, Devashish
  • Ranjan, Priya

Abstract

In a two-sector, general-equilibrium model with labor-market search frictions, we find that the wage increases and sectoral unemployment decreases upon offshoring in the presence of perfect intersectoral labor mobility. If, as a result, labor moves to the sector with the lower (or equal) vacancy costs, there is an unambiguous decrease in economywide unemployment. With imperfect intersectoral labor mobility, unemployment in the offshoring sector can rise, with an unambiguous unemployment reduction in the non-offshoring sector. Imperfect labor mobility can result in a mixed equilibrium in which only some firms offshore, with unemployment in the offshoring sector rising.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 81 (2010)
Issue (Month): 2 (July)
Pages: 219-229

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Handle: RePEc:eee:inecon:v:81:y:2010:i:2:p:219-229

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: Trade Offshoring Search Unemployment;

References

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  12. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
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Citations

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Cited by:
  1. Schmerer, Hans-Jörg, 2012. "Skill-biased labor market reforms and international competitiveness," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(37), pages 1-39.
  2. Mazumder, Debojyoti, 2013. "Inheritance, Search Friction and International Trade: A General Equilibrium Model," MPRA Paper 55250, University Library of Munich, Germany.
  3. Schmerer, Hans-Jörg, 2014. "Foreign direct investment and search unemployment: Theory and evidence," International Review of Economics & Finance, Elsevier, vol. 30(C), pages 41-56.
  4. Priya Ranjan, 2012. "Offshoring, Unemployment, and Wages: The Role of Labor Market Institutions," Working Papers 121302, University of California-Irvine, Department of Economics.
  5. Lo Turco, A. & Maggioni, D. & Picchio, M., 2012. "Offshoring and Job Stability: Evidence from Italian Manufacturing," Discussion Paper 2012-034, Tilburg University, Center for Economic Research.
  6. Kohler, Wilhelm & Wrona, Jens, 2011. "Offshoring tasks, yet creating jobs?," University of Tuebingen Working Papers in Economics and Finance 12, University of Tuebingen, Faculty of Economics and Social Sciences.
  7. Andrea Filippo Presbitero & Matteo G. Richiardi & Alessia Amighini, 2012. "Is labor flexibility a substitute to offshoring? Evidence from Italian manafacturing," Mo.Fi.R. Working Papers 72, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  8. Schmerer, Hans-Jörg, 2012. "Foreign direct investment and search unemployment : Theory and evidence," IAB Discussion Paper 201204, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  9. Tillmann Schwörer, 2012. "Offshoring, Domestic Outsourcing, and Productivity: Evidence for a Number of European Countries," Kiel Working Papers 1786, Kiel Institute for the World Economy.
  10. Tillmann Schwörer, 2013. "Offshoring, domestic outsourcing and productivity: evidence for a number of European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 149(1), pages 131-149, March.
  11. Hasan, Rana & Mitra, Devashish & Ranjan, Priya & Ahsan, Reshad N., 2012. "Trade liberalization and unemployment: Theory and evidence from India," Journal of Development Economics, Elsevier, vol. 97(2), pages 269-280.

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