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The transitional impacts of material and service offshoring

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  • Burnett, Perry
  • Cutler, Harvey

Abstract

The recent expansion of offshoring intermediate services has given rise to public fears and a possible pullback from a liberal trading system. Modeling and estimating intermediate offshoring is complicated since the shock is further down the production process. This paper incorporates the necessary transmission mechanisms into a data-intensive CGE model for the State of Colorado to estimate the current and future impacts of continuing a liberal trade policy for offshoring intermediates. The results indicate that while the overall effects of offshoring are small and positive, the future directions of service offshoring are projected to cause sizable domestic job destruction and displacement. Policies may have to be implemented to retrain domestic workers who face job loss or even consider curtailing future offshoring opportunities.

Suggested Citation

  • Burnett, Perry & Cutler, Harvey, 2018. "The transitional impacts of material and service offshoring," Journal of Policy Modeling, Elsevier, vol. 40(1), pages 136-150.
    • Handle: RePEc:eee:jpolmo:v:40:y:2018:i:1:p:136-150
    DOI: 10.1016/j.jpolmod.2017.10.001
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    More about this item

    Keywords

    Service offshoring; Material offshoring; Wage inequality; Job destruction; Offshoring transition;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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