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Offshoring of routine tasks and (de)industrialisation: Threat or opportunity--And for whom?

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  • Robert-Nicoud, Frédéric

Abstract

Offshoring, or overseas sourcing of routine tasks, generates efficiency gains that benefit consumers and workers with skills similar to those whose very jobs are threatened by offshoring. Essentially, the interaction between offshoring, footloose capital and agglomeration economies locks the comparative advantage of advanced nations in complex or strategic functions while labour services in 'routine' tasks, the coordination of which is easily codified, are provided by low-wage developing nations through the fibre optic cable. In this framework, the partial-equilibrium view that offshoring is necessarily detrimental to workers in advanced nations is misguided because the implicit counterfactual--that keeping the off-shored jobs would have no macroeconomic impact on the economy--is not warranted. In addition, inasmuch as routine tasks create few positive feedbacks, trade in tasks can be an impediment to income convergence, unlike trade in goods. In short, this paper qualifies the views that offshoring hurts workers in the North and accelerates income convergence between the North and the South.

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Bibliographic Info

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

Volume (Year): 63 (2008)
Issue (Month): 2 (March)
Pages: 517-535

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Handle: RePEc:eee:juecon:v:63:y:2008:i:2:p:517-535

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Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Offshoring Wage inequality Communication costs;

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Cited by:
  1. Thomas Kemeny & David Rigby, 2012. "Trading away what kind of jobs? Globalization, trade and tasks in the US economy," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(1), pages 1-16, April.
  2. Richard Frensch & Jan Hanousek & Evžen Kočenda, 2013. "Incomplete Specialization and Trade in Parts and Components," William Davidson Institute Working Papers Series wp1044, William Davidson Institute at the University of Michigan.
  3. Joseph F. Francois & B. Hoekman, 2009. "Services Trade and Policy," wiiw Working Papers 60, The Vienna Institute for International Economic Studies, wiiw.
  4. Richard Frensch, 2010. "European trade in parts and components : searching (for a trade model for searching) for offshoring evidence," Working Papers 280, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  5. Philipp Harms & Oliver Lorz & Dieter Urban, 2012. "Offshoring along the production chain," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 93-106, February.
  6. Fabrice Defever, 2011. "Incomplete Contracts and the Impact of Globalization on Consumer Welfare," CEP Discussion Papers dp1057, Centre for Economic Performance, LSE.
  7. Liao, Wen-Chi, 2012. "Inshoring: The geographic fragmentation of production and inequality," Journal of Urban Economics, Elsevier, vol. 72(1), pages 1-16.
  8. Zoltan Gal, 2013. "New Bangalores - The role of Central and Eastern Europe in business and IT services offshoring," Journal of Economic Development, Environment and People, Alliance of Central-Eastern European Universities, vol. 2(3), pages 77-100, September.

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