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Offshoring, Exporting, and Jobs

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  • Jose L. Groizard

    ()
    (Universitat de les Illes Balears)

  • Priya Ranjan

    ()
    (University of California, Irvine)

  • Antonio Rodriguez-Lopez

    ()
    (University of California, Irvine)

Abstract

We construct a two-sector model - one producing a homogeneous good and the other producing differentiated goods - with labor market frictions to study the impact of offshoring on intrafirm, intrasectoral, and intersectoral reallocation of jobs, and on the economy-wide unemployment rate. A reduction in the offshoring cost affects intrafirm and intrasectoral reallocation in the differentiated-good sector through a job-relocation effect, a productivity effect, and a competition effect. The key parameters determining the impact of offshoring on reallocation of jobs at various margins as well as on the economy-wide unemployment rate are the elasticity of substitution between inputs and the elasticity of demand for differentiated goods. Allowing differentiated-good firms to export creates an additional channel through which a reduction in the cost of offshoring affects jobs and unemployment. We also show that the implications of a reduction in the cost of trading final goods are different from those of a reduction in the offshoring cost."

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Bibliographic Info

Paper provided by Universitat de les Illes Balears, Departament d'Economía Aplicada in its series DEA Working Papers with number 61.

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Date of creation: 2013
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Handle: RePEc:ubi:deawps:61

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Keywords: heterogeneous firms; offshoring costs; search frictions; unemployment;

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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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