The Skill Content of Offshoring and Growth
AbstractThis paper analyses the effect of offshoring on the growth rate and welfare of a small open economy, taking into account the skill content of offshoring. The model exposes two opposing effects that increasing the extent of offshoring has on the growth rate. First, offshoring has a negative effect on the growth rate by increasing the relative wage of skilled labour and thus the costs of (skill intensive) research. Second, offshoring has a positive effect on the growth rate as it increases the effective labour endowments, which increases the size of the market and thus leads to more entry into research. Thus the overall effect of offshoring on the growth rate is ambiguous. The effect on welfare in the short run is positive, whereas the long-run welfare is ambiguous.
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Bibliographic InfoPaper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2013_12.
Date of creation: Oct 2013
Date of revision: Oct 2013
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More information through EDIRC
Offshoring; Trade in Tasks; Growth; Skill Differences;
Find related papers by JEL classification:
- F1 - International Economics - - Trade
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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