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 offshoring—not 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 InfoPaper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 11-02.
Length: 19 pages
Date of creation: Mar 2011
Date of revision: Jan 2013
Publication status: Published: The Trouble with Offshoring: Static and Dynamic Losses in the Presence of Unemployment – revised version in The World Economy, Vol. 36, No. 5 (January 2013), pp. 1-11
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Other versions of this item:
- Richard A. Brecher & Zhiqi Chen & Zhihao Yu, 2013. "The Trouble with Offshoring: Static and Dynamic Losses in the Presence of Unemployment," The World Economy, Wiley Blackwell, vol. 36(1), pages 1-11, 01.
- F20 - International Economics - - International Factor Movements and International Business - - - General
This paper has been announced in the following NEP Reports:
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.:
- Devashish Mitra & Priya Ranjan, 2007.
"Offshoring and Unemployment,"
NBER Working Papers
13149, National Bureau of Economic Research, Inc.
- 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.
- 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.
- 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 A. Brecher & Till O. Gross, 2014. "A Minimum-Wage Model of Unemployment and Growth: The Case of a Backward-Bending Demand Curve for Labor," Carleton Economic Papers 14-05, Carleton University, Department of Economics.
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