Offshoring and Unemployment: The Role of Search Frictions and Labor Minority
AbstractIn this paper, in order to study the impact of offshoring on sectoral and economy wide rates of unemployment, we construct a two sector general equilibrium model in which unemployment is caused by search frictions. The model shows that wage increases and sectoral unemployment decreases upon offshoring in the presence of perfect intersectoral labor mobility. If, as a result, labor moves to the sector with the lower (or equal) vacancy costs, there is an unambiguous decrease in economy wide unemployment. With imperfect intersectoral labor mobility, unemployment in the offshoring sector can rise, with an unambiguous unemployment reduction in the non-offshoring sector. Imperfect labor mobility can result in a mixed equilibrium in which only some firms in the industry offshore, with unemployment in this sector rising. [IZA DP no. 4136]
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by eSocialSciences in its series Working Papers with number id:2071.
Date of creation: Jun 2009
Date of revision:
Note: Institutional Papers
Contact details of provider:
Web page: http://www.esocialsciences.org
trade; unemployment; offshoring; search frictions; labor minority;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
- NEP-DGE-2009-07-03 (Dynamic General Equilibrium)
- NEP-LAB-2009-07-03 (Labour Economics)
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.:
- Jagdish Bhagwati & Arvind Panagariya, 2004.
"The Muddles over Outsourcing,"
Journal of Economic Perspectives,
American Economic Association, vol. 18(4), pages 93-114, Fall.
- Mary Amiti & Shang-Jin Wei, 2004.
"Fear of Service Outsourcing: Is It Justified?,"
NBER Working Papers
10808, National Bureau of Economic Research, Inc.
- Oleg Itskhoki & Elhanan Helpman, 2008.
"Labor Market Rigidities, Trade and Unemployment,"
2008 Meeting Papers
690, Society for Economic Dynamics.
- Elhanan Helpman & Oleg Itskhoki, 2007. "Labor Market Rigidities, Trade and Unemployment," NBER Working Papers 13365, National Bureau of Economic Research, Inc.
- Helpman, Elhanan & Itskhoki, Oleg, 2009. "Labor Market Rigidities, Trade, and Unemployment," CEPR Discussion Papers 7502, C.E.P.R. Discussion Papers.
- Mitra, Devashish & Ranjan, Priya, 2007.
"Temporary Shocks and Offshoring: The Role of External Economies and Firm Heterogeneity,"
IZA Discussion Papers
2811, Institute for the Study of Labor (IZA).
- Mitra, Devashish & Ranjan, Priya, 2008. "Temporary shocks and offshoring: The role of external economies and firm heterogeneity," Journal of Development Economics, Elsevier, vol. 87(1), pages 76-84, August.
- Mark P. Moore & Priya Ranjan, 2005. "Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality," Economic Journal, Royal Economic Society, vol. 115(503), pages 391-422, 04.
- Bilgehan Karabay & John McLaren, 2009.
"Trade, Offshoring, and the Invisible Handshake,"
NBER Working Papers
15048, National Bureau of Economic Research, Inc.
- Bardhan, Ashok Deo & Kroll, Cynthia, 2003. "The New Wave of Outsourcing," Fisher Center for Real Estate & Urban Economics, Research Reports qt02f8z392, Fisher Center for Real Estate & Urban Economics, UC Berkeley.
- Shubham Chaudhuri & Erhan Artuç & John McLaren, 2003.
"Delay and dynamics in labor market adjustment: Simulation results,"
0304-07, Columbia University, Department of Economics.
- Artuç, Erhan & Chaudhuri, Shubham & McLaren, John, 2008. "Delay and dynamics in labor market adjustment: Simulation results," Journal of International Economics, Elsevier, vol. 75(1), pages 1-13, May.
- Erhan Artuç & Shubham Chaudhuri & John McLaren, 2007. "Delay and Dynamics in Labor Market Adjustment: Simulation Results," KoÃ§ University-TUSIAD Economic Research Forum Working Papers 0703, Koc University-TUSIAD Economic Research Forum.
- Cahuc, Pierre & Wasmer, Etienne, 2001. "Does Intrafirm Bargaining Matter In The Large Firm'S Matching Model?," Macroeconomic Dynamics, Cambridge University Press, vol. 5(05), pages 742-747, November.
- Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
- Stole, Lars A & Zwiebel, Jeffrey, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 375-410, July.
- Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Padma Prakash).
If references are entirely missing, you can add them using this form.