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Offshoring and Directed Technical Change

Author

Listed:
  • Daron Acemoglu
  • Gino Gancia
  • Fabrizio Zilibotti

Abstract

We study the implications of offshoring on innovation, technology, and wage inequality in a Ricardian model with directed technical change. Profit maximization determines both the extent of offshoring and the direction of technological progress. A fall in the offshoring cost induces technical change with an ambiguous factor bias. When the initial cost of offshoring is high, an increase in offshoring opportunities causes a fall in the real wages of unskilled workers in industrial countries, skill-biased technical change and rising skill premia. When the offshoring cost is sufficiently low, instead, offshoring induces technical change biased in favor of the unskilled workers. (JEL J24, J31, L24, O33)

Suggested Citation

  • Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2015. "Offshoring and Directed Technical Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 84-122, July.
  • Handle: RePEc:aea:aejmac:v:7:y:2015:i:3:p:84-122
    Note: DOI: 10.1257/mac.20130302
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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