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A trade theorist's take on skilled-labor outsourcing

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  • Deardorff, Alan V.

Abstract

Recent concern has attended the phenomenon of skilled-labor outsourcing, in which firms in the U.S. and other advanced countries have drawn upon the services of skilled workers in developing countries for activities that they used to do at home. Motivated by this and the fact that such outsourcing would be hard to explain without technological differences, this paper explores theoretically a simple story of outsourcing in which factor proportions and technology interact across activities performed within industries or firms. The model has a single sector in which a final output is produced from two activities that differ in their intensity of use of skilled and unskilled labor. In one activity, the developed world (North) has a technical advantage. In the other it does not, but a new regime makes it possible to outsource it to the developing world (South). The paper shows that this outsourcing, if the countries continue to diversify, causes the wage of unskilled labor in North to fall below that in South. However, if factor endowments differ enough to lead to specialization, then it becomes possible for both factors in North to gain.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 14 (2005)
Issue (Month): 3 ()
Pages: 259-271

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Handle: RePEc:eee:reveco:v:14:y:2005:i:3:p:259-271

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Web page: http://www.elsevier.com/locate/inca/620165

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References

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  1. Deardorff, A.V., 1998. "Fragmentation Across Cones," Papers 98-14, Michigan - Center for Research on Economic & Social Theory.
  2. Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November.
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Cited by:
  1. Rosario Crinò, 2009. "Service Offshoring and White-Collar Employment," UFAE and IAE Working Papers 775.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Rosario Crinò, 2007. "Offshoring, Multinationals and Labor Market: A Review of the Empirical Literature," KITeS Working Papers 196, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jan 2007.
  3. Andrés Rodríguez-Clare, 2007. "Offshoring in a Ricardian World," Working Papers id:1043, eSocialSciences.
  4. Amador, João & Cabral, Sónia, 2008. "Vertical specialization across the world: a relative measure," MPRA Paper 9618, University Library of Munich, Germany.
  5. Wilhelm Kohler, 2007. "The Bazaar Effect, Unbundling of Comparative Advantage, and Migration," CESifo Working Paper Series 1932, CESifo Group Munich.
  6. João Amador & Sónia Cabral, 2008. "International Fragmentation of Production in the Portuguese Economy: What do Different Measures Tell Us?," Working Papers w200811, Banco de Portugal, Economics and Research Department.
  7. Markusen, James R., 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," CEPR Discussion Papers 5408, C.E.P.R. Discussion Papers.
  8. Pi, Jiancai & Zhou, Yu, 2012. "Public infrastructure provision and skilled–unskilled wage inequality in developing countries," Labour Economics, Elsevier, vol. 19(6), pages 881-887.
  9. Anwar, Sajid, 2013. "Outsourcing and the skilled–unskilled wage gap," Economics Letters, Elsevier, vol. 118(2), pages 347-350.
  10. Rosario Crino, 2006. "Are U.S. White-Collar Really at Risk of Service Offshoring?," KITeS Working Papers 183, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Oct 2006.
  11. Oladi, Reza & Beladi, Hamid, 2009. "Market interconnection and wages," Economics Letters, Elsevier, vol. 105(1), pages 117-119, October.
  12. Anna M. Falzoni & Lucia Tajoli, 2008. "Offshoring and the skill composition of employment in the Italian manufacturing industries," KITeS Working Papers 219, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2008.
  13. Pi, Jiancai & Zhou, Yu, 2013. "Institutional quality and skilled–unskilled wage inequality," Economic Modelling, Elsevier, vol. 35(C), pages 356-363.
  14. Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
  15. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
  16. João Amador & Robert Stehrer, 2014. "Portuguese Exports in the Global Value Chains," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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