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Wage inequality in trade-in-tasks models

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  • Hugo Rojas-Romagosa

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Abstract

Recent trade-in-tasks models suggest that relative low-skill wages may increase when low-skill tasks are offshored. However, using extensive numerical simulations of these models we find that wage inequality is increasing for almost all endowment combinations when we use a broad range of parameter values and model specifications. The most common exception is when the country is relatively small and cannot affect international prices. In the case of relatively poor lowskill abundant countries, we find that offshoring is always welfare improving, but wage inequality effects are ambiguous. Finally, we find that a trade-intasks model with three skill-types can also account for wage polarization when we allow medium-skill tasks to be offshored.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 196.

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Date of creation: Dec 2011
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Handle: RePEc:cpb:discus:196

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  1. Rossi-Hansberg, Esteban & Garicano, Luis & Antras, Pol, 2006. "Offshoring in a Knowledge Economy," Scholarly Articles 3196323, Harvard University Department of Economics.
  2. 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, C.E.P.R. Discussion Papers 5408, C.E.P.R. Discussion Papers.
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  6. Richard Baldwin & Frédéric Robert-Nicoud, 2013. "Trade-in-goods and trade-in-tasks: An integrating framework," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva, Institut d'Economie et Econométrie, Université de Genève 13103, Institut d'Economie et Econométrie, Université de Genève.
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Cited by:
  1. Davies, Ronald & Desbordes, Rodolphe, 2012. "Greenfield FDI and Skill Upgrading," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8912, C.E.P.R. Discussion Papers.

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