A Trade Theorist’s Take on Skilled-Labor Outsourcing
AbstractRecent concern has attended the phenomenon of skilled-labor outsourcing, in which firms in the U.S. and other advanced countries have drawn upon the services of skilled workers in developing countries for activities that they used to do at home. Motivated by this and the fact that such outsourcing would be hard to explain without technological differences, this paper explores theoretically a simple story of outsourcing in which factor proportions and technology interact across activities performed within industries or firms. The model has a single sector in which a final output is produced from two activities that differ in their intensity of use of skilled and unskilled labor. In one activity, the developed world (North) has a technical advantage. In the other it does not, but a new regime makes it possible to outsource it to the developing world (South). The paper shows that this outsourcing, if the countries continue to diversify, causes the wage of unskilled labor in North to fall below that in South. However, if factor endowments differ enough to lead to specialization, then it becomes possible for both factors in North to gain.
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 Research Seminar in International Economics, University of Michigan in its series Working Papers with number 519.
Length: 26 pages
Date of creation: 2004
Date of revision:
Neoclassical Trade Models;
Other versions of this item:
- Deardorff, Alan V., 2005. "A trade theorist's take on skilled-labor outsourcing," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 259-271.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
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.:
- Deardorff, A.V., 1998.
"Fragmentation Across Cones,"
98-14, Michigan - Center for Research on Economic & Social Theory.
- Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November.
- Amador, João & Cabral, Sónia, 2008.
"Vertical specialization across the world: a relative measure,"
9618, University Library of Munich, Germany.
- Amador, João & Cabral, Sónia, 2009. "Vertical specialization across the world: A relative measure," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 267-280, December.
- João Amador & Sónia Cabral, 2008. "Vertical Specialization Across the World: A Relative Measure," Working Papers w200810, Banco de Portugal, Economics and Research Department.
- Andrés Rodríguez-Clare, 2007.
"Offshoring in a Ricardian World,"
NBER Working Papers
13203, National Bureau of Economic Research, Inc.
- Anwar, Sajid, 2013. "Outsourcing and the skilled–unskilled wage gap," Economics Letters, Elsevier, vol. 118(2), pages 347-350.
- Rosario Crinò, 2009.
"Service Offshoring and White-Collar Employment,"
391, Barcelona Graduate School of Economics.
- Rosario Crinò, 2007. "Service Offshoring and White-Collar Employment," CESifo Working Paper Series 2040, CESifo Group Munich.
- Rosario Crinò, 2009. "Service Offshoring and White-Collar Employment," UFAE and IAE Working Papers 775.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- João Amador & Sónia Cabral, 2008.
"International Fragmentation of Production in the Portuguese Economy: What do Different Measures Tell Us?,"
w200811, Banco de Portugal, Economics and Research Department.
- Amador, João & Cabral, Sónia, 2008. "International fragmentation of production in the Portuguese economy: What do different measures tell us?," MPRA Paper 9783, University Library of Munich, Germany.
- Pi, Jiancai & Zhou, Yu, 2013. "Institutional quality and skilled–unskilled wage inequality," Economic Modelling, Elsevier, vol. 35(C), pages 356-363.
- Anna M. Falzoni & Lucia Tajoli, 2008. "Offshoring and the skill composition of employment in the Italian manufacturing industries," KITeS Working Papers 219, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2008.
- Rosario Crinò, 2007. "Offshoring, Multinationals and Labor Market: A Review of the Empirical Literature," KITeS Working Papers 196, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jan 2007.
- Oladi, Reza & Beladi, Hamid, 2009.
"Market interconnection and wages,"
Elsevier, vol. 105(1), pages 117-119, October.
- Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
- Wilhelm Kohler, 2007. "The Bazaar Effect, Unbundling of Comparative Advantage, and Migration," CESifo Working Paper Series 1932, CESifo Group Munich.
- 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
5408, C.E.P.R. Discussion Papers.
- James Markusen, 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," NBER Working Papers 11827, National Bureau of Economic Research, Inc.
- Pi, Jiancai & Zhou, Yu, 2012. "Public infrastructure provision and skilled–unskilled wage inequality in developing countries," Labour Economics, Elsevier, vol. 19(6), pages 881-887.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (FSPP Webmaster).
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.