Offshoring Production: A Simple Model of Wages, Productivity, and Growth
AbstractWe examine the relationship between o¤shoring and the labour market in an occupational choice model of trade and endogenous growth where workers are employed on the basis of their individual skill levels. Trade liberalization leads to o¤shoring and reduces employment in the manufacturing sector. Displaced workers move into the traditional and innovation sectors ac- cording to their skill levels, shaping real wages and aggregate productivity in the manufacturing sector. The paper aims to show how inter-sectoral labour market adjustments, highlighted by skill heterogeneity, could be a possible explanation for the simultaneous rise in productivity and reduction in real wages that have coincided with the sharp escalation of o¤shoring activities in the US manufacturing sector since 2004.
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Bibliographic InfoPaper provided by University of Modena and Reggio E., Dept. of Economics in its series Center for Economic Research (RECent) with number 027.
Length: pages 27
Date of creation: Nov 2008
Date of revision:
o¤shoring; trade liberalization; real wages; growth; productivity; inter-sectoral labour reallocation; skill heterogeneity.;
Other versions of this item:
- Colin Davis & Alireza Naghavi, 2011. "Offshoring Production: A Simple Model Of Wages, Productivity, And Growth," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 334-348, 04.
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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