An Offshoring Setup

This paper builds a model of trade in final goods that differ in skill-intensity and intermediate tasks that differ in tradability. A skill -abundant country whose final goods productivity is high relative to the rest of the world is shown to import (more unskilled tasks than skilled tasks, given identical tradability schedules for the latter and the former tasks. Transition from the non-offshoring to the offshoring equilibrium yields wage and employment effects in the long run that switch from negative to positive as tradability declines, and the switches occurr at a higher tradability level for skilled tasks. The findings are consistent with the young empirical literature.