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A Rationale For Evidence On Service Offshoring

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  • Tobal, Martin
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    Abstract

    On the one hand, empiricists debate on which and how many labor dimensions are relevant for understanding the employment effects of the 1990's service offshoring boom. On the other hand, theorists pursue trade theory's traditional goal: to explain wage-responses to the shock. This paper rationalizes recent evidence on employment and reconciles theory with a current empirical debate. To this purpose, the article derives employment responses that are continous in occupations' off shoring costs and depend on two labor dimensions: skill-intensities and tradeability characteristics. Furthermore, the paper yields intutitive wage-respsonses and addresses theorists' traditional concern. In particular, under the assumption that knowledge is occupation-specific, the article derives wage- responses that are not fully explained by skill-levels. More precisely, service offshoring deteriorates the wage of "many" skilled workers whose tasks have relatively low offshoring costs.

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    Bibliographic Info

    Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt5s4056z6.

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    Date of creation: 01 Sep 2011
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    Handle: RePEc:cdl:ucsdec:qt5s4056z6

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    Keywords: labor; wages; Social and Behavioral Sciences;

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    1. Alan S. Blinder, 2009. "How Many US Jobs Might be Offshorable?," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(2), pages 41-78, April.
    2. Kjell Erik Lommerud & Frode Meland & Odd Rune Straume, 2005. "Can Deunionization Lead to International Outsourcing?," CESifo Working Paper Series 1545, CESifo Group Munich.
    3. Oecd, 2005. "Potential Offshoring of ICT-intensive Using Occupations," OECD Digital Economy Papers 91, OECD Publishing.
    4. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 2004. "The Muddles over Outsourcing," International Trade 0408004, EconWPA.
    5. Gregory Mankiw, N. & Swagel, Phillip, 2006. "The politics and economics of offshore outsourcing," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 1027-1056, July.
    6. Karsten Bjerring Olsen, 2006. "Productivity Impacts of Offshoring and Outsourcing: A Review," OECD Science, Technology and Industry Working Papers 2006/1, OECD Publishing.
    7. Neary, J Peter, 1985. "Theory and Policy of Adjustment in an Open Economy," CEPR Discussion Papers 61, C.E.P.R. Discussion Papers.
    8. Robert E. Lipsey, 2009. "Measuring International Trade in Services," NBER Chapters, in: International Trade in Services and Intangibles in the Era of Globalization, pages 27-70 National Bureau of Economic Research, Inc.
    9. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "The rise of offshoring: it's not wine for cloth anymore," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 59-102.
    10. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
    11. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages C166-C185, 03.
    12. James R. Markusen & Bridget Strand, 2007. "Trade in Business Services in General Equilibrium," NBER Working Papers 12816, National Bureau of Economic Research, Inc.
    13. Mary Amiti & Shang-Jin Wei, 2009. "Service Offshoring and Productivity: Evidence from the US," The World Economy, Wiley Blackwell, vol. 32(2), pages 203-220, 02.
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