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Offshoring of Service Jobs

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  • Ufuk Demiroglu

Abstract

Many previously-nontraded services have become tradable, or are expected to become so, as a result of technological advances in information technology. This situation has raised concerns about the future of jobs and workers' incomes in advanced countries, especially in the United States. However, a review of the U.S. evidence shows that the current extent of service offshoring is very modest in the United States, not only as a share of GDP but also in terms of its contribution to worker displacements. Service offshoring is currently a minor part of the overall international economic competition that the United States faces. Service offshoring appears to have been relatively intense for IT occupations, but the employment and wage trends in those occupations still compare favorably to U.S. averages. While offshoring might become much more significant in the future, a closer look at occupation details reveals that most U.S. service jobs are not suitable for performing remotely from abroad, even when some significant cultural and institutional barriers are ignored. In addition, a range of transaction and adjustment costs slow offshoring growth, and it would take a long time, possibly decades, for offshoring to attain its potential limits, although the available estimates of those limits and when they would be reached are very uncertain. This paper's assessment is that the share of existing jobs in the United States that have the possibility of exposure to competition from service offshoring is limited to 10 to 20 percent, and the impact will be sufficiently gradual to blend in with the ongoing ordinary structural changes in the U.S. economy.

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Bibliographic Info

Article provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its journal Central Bank Review.

Volume (Year): 8 (2008)
Issue (Month): 1 ()
Pages: 17-63

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Handle: RePEc:tcb:cebare:v:8:y:2008:i:1:p:17-63

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Related research

Keywords: Offshoring; Outsourcing; Service trade;

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References

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  1. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing," IMF Working Papers 04/186, International Monetary Fund.
  2. N. Gregory Mankiw & Phillip Swagel, 2006. "The Politics and Economics of Offshore Outsourcing," NBER Working Papers 12398, National Bureau of Economic Research, Inc.
  3. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
  4. Bartel, Ann P & Lach, Saul & Sicherman, Nachum, 2005. "Outsourcing and Technological Change," CEPR Discussion Papers 5082, C.E.P.R. Discussion Papers.
  5. Catherine L. Mann, 2003. "Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth," Policy Briefs PB03-11, Peterson Institute for International Economics.
  6. Thomas F. Siems, 2006. "Beyond the outsourcing angst: making America more productive," Economic Letter, Federal Reserve Bank of Dallas, vol. 1(feb).
  7. Bardhan, Ashok Deo & Kroll, Cynthia, 2003. "The New Wave of Outsourcing," Fisher Center for Real Estate & Urban Economics, Research Reports qt02f8z392, Fisher Center for Real Estate & Urban Economics, UC Berkeley.
  8. 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.
  9. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  10. Martin Neil Baily & Robert Z. Lawrence, 2004. "What Happened to the Great U.S. Job Machine? The Role of Trade and Electronic Offshoring," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 211-284.
  11. Robert T. Parry, 2004. "Globalization: threat or opportunity for the U.S. economy?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may21.
  12. J. Steven Landefeld & Raymond J. Mataloni, 2004. "Offshore Outsourcing and Multinational Companies," BEA Papers 0043, Bureau of Economic Analysis.
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Cited by:
  1. Martin Borowiecki & Bernhard Dachs & Doris Hanzl-Weiss & Steffen Kinkel & Johannes Pöschl & Magdolna Sass & Thomas Christian Schmall & Robert Stehrer & Andrea Szalavetz, 2012. "Global Value Chains and the EU Industry," wiiw Research Reports 383, The Vienna Institute for International Economic Studies, wiiw.
  2. Püschel, Julia, 2012. "Task dependence of U.S. service offshoring patterns," Discussion Papers 2012/15, Free University Berlin, School of Business & Economics.

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