The Trouble with Offshoring: Static and Dynamic Losses in the Presence of Unemployment
This paper provides theoretical support for the popular objection to offshoring, whereby firms at home employ services of labor located abroad. In the presence of unemployment, our analysis highlights welfare losses from offshoring—not only for the static case of a fixed stock of capital, but also for the dynamic one of optimal saving and investment. We compare these static and dynamic losses to the gains that would instead arise under full-employment conditions, assumed by most of the theoretical literature on offshoring. Our results suggest that public concerns over offshoring are justified when unemployment is taken explicitly into account.
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Volume (Year): 36 (2013)
Issue (Month): 1 (01)
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References listed on IDEAS
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- Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Outsourcing Peter To Pay Paul: High-Skill Expectations And Low-Skill Wages With Imperfect Labor Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 12(04), pages 463-479, September.
- Mitra, Devashish & Ranjan, Priya, 2007.
"Offshoring and Unemployment,"
IZA Discussion Papers
2805, Institute for the Study of Labor (IZA).
- Devashish Mitra & Priya Ranjan, 2007. "Offshoring and Unemployment," Working Papers 060719, University of California-Irvine, Department of Economics.
- Devashish Mitra & Priya Ranjan, 2007. "Offshoring and Unemployment," NBER Working Papers 13149, National Bureau of Economic Research, Inc.
- Richard A. Brecher & Zhiqi Chen, 2010. "Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 990-1000, November.
- Richard Brecher & Zhiqi Chen, 2008. "Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing," Carleton Economic Papers 08-07, Carleton University, Department of Economics, revised Nov 2010.
- Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
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