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Low-skill offshoring and welfare compensation policies

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  • Agnese, Pablo
  • Hromcová, Jana

Abstract

We analyze the effects of low-skill offshoring on welfare. In the context of a matching model with different possible equilibria we discuss three alternative policies that could potentially outweigh the negative welfare effects of offshoring, namely, a change of the unemployment benefits, labor market flexibility, and a progressive tax structure. Our calibrations for the German economy suggest that increased flexibility can bring low-skill workers to pre-offshoring welfare levels, something that cannot be accomplished by meddling with the unemployment benefits scheme or a more progressive tax structure. In addition, we find that a full compensation can be achieved by an upgrading of low-skill workers, its size depending on the type of equilibrium involved. In sum, our analysis gives support to labor market flexibility and upgrading by education as best therapies for offshoring.

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  • Agnese, Pablo & Hromcová, Jana, 2016. "Low-skill offshoring and welfare compensation policies," Economic Modelling, Elsevier, vol. 52(PB), pages 408-426.
    • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:408-426
    DOI: 10.1016/j.econmod.2015.09.022
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    Cited by:

    1. Agnese, Pablo & Hromcová, Jana, 2019. "Offshoring and Skill-Biased Technical Change in the Context of US Protectionism," IZA Discussion Papers 12593, Institute of Labor Economics (IZA).
    2. Hromcová, Jana & Agnese, Pablo, 2019. "Globalization, welfare, and the attitudes toward higher education," Economic Modelling, Elsevier, vol. 81(C), pages 503-517.
    3. Agnese, Pablo & Hromcová, Jana, 2016. "Offshoring, Endogenous Skill Decision, and Labor Market Outcomes," IZA Discussion Papers 10299, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Offshoring; Welfare; Unemployment benefits; Labor market flexibility; Upgrading;
    All these keywords.

    JEL classification:

    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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