Advanced Search
MyIDEAS: Login to save this paper or follow this series

Trading Tasks: A Dynamic Theory of Offshoring

Contents:

Author Info

  • Benz, Sebastian

Abstract

This paper is a dynamic extension of the well-known theory of trade in tasks. In my model, a firm's offshoring decision is governed by production cost savings, but also considers potential imitation risk. I show that such a consideration reduces the level of offshoring compared to a static optimization and that adjustment of offshoring volume with respect to changes in offshoring costs or labor endowment is characterized by overshooting and subsequent movement toward a steady state. Moreover, I find that offshoring affects wages via more channels than are apparent in static models. More precisely, I identify a short-run intertemporal profit effect and a long-run composition effect, both of which depend on the endogenous rate of product imitation. These effects can reverse well-known static wage effects from offshoring, such as the labor supply effect and productivity effect. The dynamic adjustment predicted by this model has important implications for empirical strategies seeking to identify a meaningful correlation of offshoring and relative wages. --

Download Info

If 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.
File URL: http://econstor.eu/bitstream/10419/79816/1/VfS_2013_pid_55.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79816.

as in new window
Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:vfsc13:79816

Contact details of provider:
Email:
Web page: http://www.socialpolitik.org/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports, Federal Reserve Bank of New York 96, Federal Reserve Bank of New York.
  2. Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target-Salden und die deutsche Kapitalbilanz im Zeichen der europäischen Zahlungsbilanzkrise," Credit and Capital Markets, Credit and Capital Markets, Credit and Capital Markets, vol. 45(4), pages 465-487.
  3. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Task Trade between Similar Countries," NBER Working Papers 14554, National Bureau of Economic Research, Inc.
  4. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, Elsevier, vol. 50(1), pages 51-71, February.
  5. Grossman, G.M. & Helpman, E., 1989. "Endogemour Product Cycles," Papers, Tel Aviv 10-89, Tel Aviv.
  6. Zhu, Susan Chun & Trefler, Daniel, 2005. "Trade and inequality in developing countries: a general equilibrium analysis," Journal of International Economics, Elsevier, Elsevier, vol. 65(1), pages 21-48, January.
  7. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 123(2), pages 489-530, 05.
  8. David Hummels & Rasmus Jørgensen & Jakob R. Munch & Chong Xiang, 2011. "The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data," NBER Working Papers 17496, National Bureau of Economic Research, Inc.
  9. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, Elsevier, vol. 42(3-4), pages 371-393, May.
  10. Egger, Hartmut & Kreickemeier, Udo, 2008. "International fragmentation: Boon or bane for domestic employment," European Economic Review, Elsevier, Elsevier, vol. 52(1), pages 116-132, January.
  11. Elhanan Helpman, 1992. "Innovation, Imitation, and Intellectual Property Rights," NBER Working Papers 4081, National Bureau of Economic Research, Inc.
  12. Grossman, G.M. & Helpman, E., 1989. "Endogenous Prduct Cycles," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 144, Princeton, Woodrow Wilson School - Public and International Affairs.
  13. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports, Federal Reserve Bank of New York 72, Federal Reserve Bank of New York.
  14. Lee Branstetter & Kamal Saggi, 2011. "Intellectual Property Rights, Foreign Direct Investment and Industrial Development," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 121(555), pages 1161-1191, 09.
  15. Glass, Amy Jocelyn & Saggi, Kamal, 2002. "Intellectual property rights and foreign direct investment," Journal of International Economics, Elsevier, Elsevier, vol. 56(2), pages 387-410, March.
  16. Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
  17. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(4), pages 759-84, August.
  18. Chang-Tai Hsieh & Keong T. Woo, 2005. "The Impact of Outsourcing to China on Hong Kong's Labor Market," American Economic Review, American Economic Association, American Economic Association, vol. 95(5), pages 1673-1687, December.
  19. Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, Elsevier, vol. 55(1), pages 133-153, February.
  20. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(494), pages C166-C185, 03.
  21. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 907-940, August.
  22. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, American Economic Association, vol. 98(5), pages 1978-97, December.
  23. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S71-102, October.
  24. Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies, Palgrave Macmillan, vol. 32(4), pages 641-665, December.
  25. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, Elsevier, vol. 43(4-6), pages 935-945, April.
  26. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 8(1), pages 71-79.
  27. Horn, Henrik, 1983. "Some implications of non-homotheticity in production in a two-sector general equilibrium model with monopolistic competition," Journal of International Economics, Elsevier, Elsevier, vol. 14(1-2), pages 85-101, February.
  28. Branstetter, Lee & Fisman, Ray & Foley, C. Fritz & Saggi, Kamal, 2011. "Does intellectual property rights reform spur industrial development?," Journal of International Economics, Elsevier, Elsevier, vol. 83(1), pages 27-36, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Luise Röpke, 2013. "The Development of Renewable Energies and Supply Security: A Trade-Off Analysis," Ifo Working Paper Series Ifo Working Paper No. 151, Ifo Institute for Economic Research at the University of Munich.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc13:79816. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

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.