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Offshoring, Exporting, and Jobs

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  • Jose Luis Groizard

    ()
    (Department of Economics, Universitat de les Illes Balears)

  • Priya Ranjan

    ()
    (Department of Economics, University of California-Irvine)

  • Jose Antonio Rodriguez-Lopez

    ()
    (Department of Economics, University of California-Irvine)

Abstract

We construct a heterogeneous-firm model with a continuum of inputs to study the impact of offshoring on job flows at both the intensive and extensive margins. We identify three channels through which a reduction in the cost of offshoring affects firm-level employment: a job-relocation effect, a productivity effect, and a competition effect. Whether there is net job creation or job destruction crucially depends on the elasticity of substitution between inputs: the greater the elasticity, the more likely it is that offshoring causes overall job destruction. When firms are allowed to export, a reduction in the cost of offshoring makes offshoring firms more productive in the export market, which leads to further job creation. This offshoring-induced job creation due to exporting possibilities increases the likelihood that the overall effect of offshoring on industry employment is positive.

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File URL: http://www.economics.uci.edu/files/economics/docs/workingpapers/2012-13/rodriguez-12.pdf
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Bibliographic Info

Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 121312.

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Length: 40 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:irv:wpaper:121312

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Keywords: Heterogeneous firms; Employment; Offshoring costs;

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  1. Pinelopi K. Goldberg & Amit Khandelwal & Nina Pavcnik & Petia Topalova, 2008. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," NBER Working Papers 14416, National Bureau of Economic Research, Inc.
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  7. Carl Davidson & Steven J. Matusz, 2005. "Trade and Turnover: Theory and Evidence," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 13(5), pages 861-880, November.
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  12. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
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  15. Pierre Biscourp & Francis Kramarz, 2004. "Employment, Skill Structure and International Trade : Firm-level Evidence for France," Working Papers, Centre de Recherche en Economie et Statistique 2004-28, Centre de Recherche en Economie et Statistique.
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Cited by:
  1. Jose L. Groizard & Priya Ranjan & Antonio Rodriguez-Lopez, 2014. "Trade Costs and Job Flows: Evidence from Establishment-Level Data," CESifo Working Paper Series 4876, CESifo Group Munich.

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