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Trading Tasks: A Simple Theory of Offshoring

  • Gene M. Grossman
  • Esteban Rossi-Hansberg

We propose a theory of the global production process that focuses on tradeable tasks, and use it to study how falling costs of offshoring affect factor prices in the source country. We identify a productivity effect of task trade that benefits the factor whose tasks are more easily moved offshore. In the light of this effect, reductions in the cost of trading tasks can generate shared gains for all domestic factors, in contrast to the distributional conflict that typically results from reductions in the cost of trading goods. (JEL F11, F16)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 5 (December)
Pages: 1978-97

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Handle: RePEc:aea:aecrev:v:98:y:2008:i:5:p:1978-97
Note: DOI: 10.1257/aer.98.5.1978
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  13. Esteban Rossi-Hansberg & Pol Antras & Luis Garicano, 2005. "Offshoring in a Knowledge Economy," 2005 Meeting Papers 196, Society for Economic Dynamics.
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