Advanced Search
MyIDEAS: Login

A Simple Model of Trade, Job Task Offshoring and Social Insurance

Contents:

Author Info

  • Thede, Susanna

    ()
    (Department of Economics, Lund University)

Abstract

We provide a simple model of trade, job task offshoring and social insurance to identify economic mechanisms through which the interplay between insurance design, (final-goods) trade and job task offshoring determine domestic producer conditions. A skill-abundant home country that may have more productive workers relocates low-skill job tasks to a labor-abundant foreign country. Only the home country provides social insurance to its citizens. Using a simple conceptualization of social insurance targeting the main mechanisms through which insurance design impacts on producer conditions, we formalize productivity, wage-restrictive, compensation, cost-enhancing, cost-redistributive and labor-supply effects of insurance. The home country’s labor productivity is superior if the health status of the labor force is improved by health insurance. Generous unemployment insurance trigger binding reservation wages, giving rise to labor-supply effects that lead to a domestic overspecialization of production in trade equilibrium. This tendency is stronger with an insurance design that incorporates a cost-coverage link. Offshoring can introduce, enhance or reduce unemployment in the unskilled labor market depending on a combination of market-related factors and insurance design. In particular, offshoring may give rise to a combination of market-related effects that offset unskilled worker dependency on generous unemployment insurance. An insurance regulation that provides generous unemployment benefits and stipulates cost-redistribution can give rise to a compensation effect through which offshoring generates a high-skill wage reduction.

Download Info

If 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.
File URL: http://project.nek.lu.se/publications/workpap/papers/WP12_16.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Lund University, Department of Economics in its series Working Papers with number 2012:16.

as in new window
Length: 17 pages
Date of creation: 11 Jun 2012
Date of revision:
Handle: RePEc:hhs:lunewp:2012_016

Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
More information through EDIRC

Related research

Keywords: Heckscher-Ohlin; Producer conditions; Labor-market adjustments; Insurance design;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Sinn, Hans-Werner, 2004. "The new systems competition," Munich Reprints in Economics 19608, University of Munich, Department of Economics.
  2. Sinn, Hans-Werner, 1997. "The selection principle and market failure in systems competition," Journal of Public Economics, Elsevier, vol. 66(2), pages 247-274, November.
  3. Christian Keuschnigg & Evelyn Ribi, 2007. "Outsourcing, Unemployment and Welfare Policy," Working Papers 0720, Oxford University Centre for Business Taxation.
  4. Egger, Hartmut & Falkinger, Josef, 2003. "The distributional effects of international outsourcing in a 2 x 2 production model," The North American Journal of Economics and Finance, Elsevier, vol. 14(2), pages 189-206, August.
  5. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June.
  6. Wright, Greg C., 2014. "Revisiting the employment impact of offshoring," European Economic Review, Elsevier, vol. 66(C), pages 63-83.
  7. 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.
  8. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
  9. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
  10. Mitra, Devashish & Ranjan, Priya, 2007. "Offshoring and Unemployment," IZA Discussion Papers 2805, Institute for the Study of Labor (IZA).
  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. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  13. Pushan Dutt & Devashish Mitra & Priya Ranjan, 2007. "International Trade and Unemployment: Theory and Cross-National Evidence," Working Papers 070808, University of California-Irvine, Department of Economics.
  14. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hhs:lunewp:2012_016. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Edgerton).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.