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Skilled-unskilled wage inequality and offshore outsourcing with asymmetric adjustment costs

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  • Chakrabarti, Avik
  • Mitra, Rajarshi

Abstract

We present a model that can capture the effects of offshore outsourcing on the wedge between the wages of skilled and unskilled workers when costs of adjustment are asymmetric. We identify conditions under which offshore outsourcing activities widen the skilled-unskilled wage inequality in the presence of asymmetric adjustment costs. We show how a higher cost of adjustment in the import-competing sector can magnify the offshore outsourcing induced gap between the wages of the skilled and unskilled workers. We also demonstrate the sensitivity of the effects of offshore outsourcing, on the skilled-unskilled wage gap, to asymmetries in the costs of adjustment.

Suggested Citation

  • Chakrabarti, Avik & Mitra, Rajarshi, 2010. "Skilled-unskilled wage inequality and offshore outsourcing with asymmetric adjustment costs," International Review of Economics & Finance, Elsevier, vol. 19(2), pages 340-345, April.
    • Handle: RePEc:eee:reveco:v:19:y:2010:i:2:p:340-345
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    3. Pi, Jiancai & Zhou, Yu, 2013. "Institutional quality and skilled–unskilled wage inequality," Economic Modelling, Elsevier, vol. 35(C), pages 356-363.
    4. Jeff P. Boone & Inder K. Khurana & K. K. Raman, 2011. "Litigation Risk and Abnormal Accruals," Working Papers 0020, College of Business, University of Texas at San Antonio.
    5. Anwar, Sajid, 2013. "Outsourcing and the skilled–unskilled wage gap," Economics Letters, Elsevier, vol. 118(2), pages 347-350.
    6. Maroula Khraiche, 2009. "Trade, Firm Structure, and Migration of Talent," Working papers 2009-35, University of Connecticut, Department of Economics.
    7. Pi, Jiancai & Zhou, Yu, 2012. "Public infrastructure provision and skilled–unskilled wage inequality in developing countries," Labour Economics, Elsevier, vol. 19(6), pages 881-887.
    8. Anwar, Sajid & Sun, Sizhong & Valadkhani, Abbas, 2013. "International outsourcing of skill intensive tasks and wage inequality," Economic Modelling, Elsevier, vol. 31(C), pages 590-597.
    9. Bakhtiari, Sasan, 2012. "Offshoring, wages and the growing skill gap: Advocating offshoring without sectoral reallocation," International Review of Economics & Finance, Elsevier, vol. 23(C), pages 46-58.
    10. Khraiche, Maroula, 2014. "Trade, capital adjustment and the migration of talent," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 24-40.

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