Taking Public Opinion Seriously: A General Equilibrium Model of Low-Wage Competition, Offshoring, and Unemployment
This paper analyzes a North-South trade model with costly offshoring and equilibrium unemployment due to union wage setting. Reductions in the amount of resources required in the offshoring process usually decrease employment, though the opposite can happen at a low initial level of offshoring activity. If additional offshoring leads to a fall in the scale of Northern firms, the increase in Southern workers’ utility comes at the expense of a reduction in each Northern agent’s welfare. The model can be used to make a case for a “pragmatic union leader”: unions have an incentive to take measures that reduce their bargaining power. With firm heterogeneity, there is scope for multiple equilibria.
References listed on IDEAS
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- Wilhelm Kohler & Jens Wrona, 2010.
"Offshoring Tasks, yet Creating Jobs?,"
CESifo Working Paper Series
3019, CESifo Group Munich.
- Kohler, Wilhelm & Wrona, Jens, 2011. "Offshoring tasks, yet creating jobs?," University of Tuebingen Working Papers in Economics and Finance 12, University of Tuebingen, Faculty of Economics and Social Sciences.
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- Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
- Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57, November. Full references (including those not matched with items on IDEAS)
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