IDEAS home Printed from https://ideas.repec.org/a/aea/aejmac/v2y2010i2p227-58.html
   My bibliography  Save this article

Offshoring in a Ricardian World

Author

Listed:
  • Andrés Rodríguez-Clare

Abstract

This paper proposes a Ricardian model to understand the short-run and long-run aggregate effects of increased fragmentation and offshoring on rich and poor countries. The short-run analysis shows that, when offshoring is sufficiently high, further increases in offshoring benefit the poor country and hurt the rich country. But these effects may be reversed in the long run as countries adjust their research efforts in response to increased offshoring. In particular, in the long run, the rich country always gains from increased offshoring, whereas poor countries see their static gains partially eroded by a decline in their research efforts. (JEL F12, F23, L24, M16)

Suggested Citation

  • Andrés Rodríguez-Clare, 2010. "Offshoring in a Ricardian World," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 227-258, April.
  • Handle: RePEc:aea:aejmac:v:2:y:2010:i:2:p:227-58
    Note: DOI: 10.1257/mac.2.2.227
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.2.227
    Download Restriction: no

    File URL: http://www.aeaweb.org/aej/mac/data/2008-0016_data.zip
    Download Restriction: no

    File URL: http://www.aeaweb.org/aej/mac/app/2008-0016_app.pdf
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers 95-14, California Davis - Institute of Governmental Affairs.
    2. Deardorff, Alan V., 2001. "Fragmentation in simple trade models," The North American Journal of Economics and Finance, Elsevier, vol. 12(2), pages 121-137, July.
    3. Baldwin, Richard E. & Robert-Nicoud, Frédéric, 2007. "Offshoring: general equilibrium effects on wages, production and trade," LSE Research Online Documents on Economics 19720, London School of Economics and Political Science, LSE Library.
    4. Jones, Ronald W., 2005. "Immigration vs. outsourcing: Effects on labor markets," International Review of Economics & Finance, Elsevier, vol. 14(2), pages 105-114.
    5. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "The rise of offshoring: it's not wine for cloth anymore," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 59-102.
    6. 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, Oxford University Press, vol. 114(3), pages 907-940.
    7. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    8. Glass, Amy Jocelyn & Saggi, Kamal, 2001. "Innovation and wage effects of international outsourcing," European Economic Review, Elsevier, vol. 45(1), pages 67-86, January.
    9. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Offshoring and product innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 517-532, March.
    10. Gregory Mankiw, N. & Swagel, Phillip, 2006. "The politics and economics of offshore outsourcing," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 1027-1056, July.
    11. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    12. Eaton, Jonathan & Kortum, Samuel, 2001. "Technology, trade, and growth: A unified framework," European Economic Review, Elsevier, vol. 45(4-6), pages 742-755, May.
    13. Alvarez, Fernando & Lucas, Robert Jr., 2007. "General equilibrium analysis of the Eaton-Kortum model of international trade," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1726-1768, September.
    14. Edward E. Leamer, 2007. "A Flat World, a Level Playing Field, a Small World After All, or None of the Above? A Review of Thomas L Friedman's The World is Flat," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 83-126, March.
    15. Martin Neil Baily & Robert Z. Lawrence, 2004. "What Happened to the Great U.S. Job Machine? The Role of Trade and Electronic Offshoring," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 211-284.
    16. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
    17. repec:fth:bosecd:110 is not listed on IDEAS
    18. 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.
    19. Donald R. Davis & David E. Weinstein, 2002. "Technological Superiority and the Losses from Migration," NBER Working Papers 8971, National Bureau of Economic Research, Inc.
    20. Jagdish Bhagwati, 1958. "Immiserizing Growth: A Geometrical Note," Review of Economic Studies, Oxford University Press, vol. 25(3), pages 201-205.
    21. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
    22. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
    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


    Cited by:

    1. Hartmut Egger & Udo Kreickemeier & Jens Wrona, 2017. "Offshoring Domestic Jobs," World Scientific Book Chapters,in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 2, pages 27-70 World Scientific Publishing Co. Pte. Ltd..
    2. Pol Antràs & Esteban Rossi-Hansberg, 2009. "Organizations and Trade," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 43-64, May.
    3. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Offshoring and product innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 517-532, March.
    4. Martin Davies, 2016. "Technology Transfer and North–South," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 447-483, August.
    5. Mitra, Devashish & Ranjan, Priya, 2007. "Offshoring and Unemployment," IZA Discussion Papers 2805, Institute for the Study of Labor (IZA).
    6. Gene M. Grossman & Esteban Rossi‐Hansberg, 2012. "Task Trade Between Similar Countries," Econometrica, Econometric Society, vol. 80(2), pages 593-629, March.
    7. Kwok Tong Soo, 2014. "The gains from trade in intermediate goods," Working Papers 63719205, Lancaster University Management School, Economics Department.
    8. Arne Bigsten & Dick Durevall & Farzana Munshi, 2012. "Offshoring and occupational wages: Some empirical evidence," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(2), pages 253-269, January.
    9. Baldwin, Richard & Robert-Nicoud, Frédéric, 2014. "Trade-in-goods and trade-in-tasks: An integrating framework," Journal of International Economics, Elsevier, vol. 92(1), pages 51-62.
    10. Rosario Crinò, "undated". "Service Offshoring and White-Collar Employment," Working Papers 391, Barcelona Graduate School of Economics.
    11. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    12. Russell Hillberry & Thibault Fally, 2015. "A Coasian Model of International Production Chains," 2015 Meeting Papers 282, Society for Economic Dynamics.
    13. repec:eee:reveco:v:54:y:2018:i:c:p:244-261 is not listed on IDEAS
    14. Stijepic, Denis & Wagner, Helmut, 2008. "Impacts of Intermediate Trade on Structural Change," MPRA Paper 40841, University Library of Munich, Germany, revised 23 Aug 2012.
    15. Bøler, Esther Ann & Moxnes, Andreas & Ulltveit-Moe, Karen-Helene, 2012. "Technological Change, Trade in Intermediates and the Joint Impact on Productivity," CEPR Discussion Papers 8884, C.E.P.R. Discussion Papers.
    16. repec:eee:eecrev:v:98:y:2017:i:c:p:217-239 is not listed on IDEAS
    17. repec:gen:geneem:11112 is not listed on IDEAS

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejmac:v:2:y:2010:i:2:p:227-58. 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: (Michael P. Albert). General contact details of provider: http://edirc.repec.org/data/aeaaaea.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.