Offshoring Domestic Jobs
AbstractWe set up a two-country general equilibrium model, in which heterogeneous firms from one country (the source country) can offshore routine tasks to a low-wage host country. The most productive firms self-select into offshoring, and the impact on welfare in the source country can be positive or negative, depending on the share of firms engaged in offshoring. Each firm is run by an entrepreneur, and inequality between entrepreneurs and workers as well as intra-group inequality among entrepreneurs is higher with offshoring than in autarky. All results hold in a model extension with firm-level rent sharing, which results in aggregate unemployment. In this extended model, offshoring furthermore has non-monotonic effects on unemployment and intra-group inequality among workers. The paper also offers a calibration exercise to quantify the effects of offshoring.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4083.
Date of creation: 2013
Date of revision:
offshoring; heterogeneous firms; income inequality;
Other versions of this item:
- Wrona, Jens & Egger, Hartmut & Kreickemeier, Udo, 2013. "Offshoring Domestic Jobs," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order, Verein fÃ¼r Socialpolitik / German Economic Association 79995, Verein für Socialpolitik / German Economic Association.
- Egger, Hartmut & Kreickemeier, Udo & Wrona, Jens, 2013. "Offshoring domestic jobs," University of Tuebingen Working Papers in Economics and Finance, University of Tuebingen, Faculty of Economics and Social Sciences 50, University of Tuebingen, Faculty of Economics and Social Sciences.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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- Moser, Christoph & Urban, Dieter M & Weder di Mauro, Beatrice, 2009. "Offshoring, Firm Performance and Establishment-Level Employment: Identifying Productivity and Downsizing Effects," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7455, C.E.P.R. Discussion Papers.
- Gene M. Grossman & Esteban Rossi-Hansberg, 2008.
"Trading Tasks: A Simple Theory of Offshoring,"
American Economic Review, American Economic Association,
American Economic Association, vol. 98(5), pages 1978-97, December.
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