IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_3019.html
   My bibliography  Save this paper

Offshoring Tasks, yet Creating Jobs?

Author

Listed:
  • Wilhelm Kohler
  • Jens Wrona

Abstract

We show that in a Ricardo-Viner-type trade model with unemployment due to search and matching the productivity effect of offshoring emphasized by Grossman & Rossi-Hansberg (2008) emerges as a vehicle of job creation. Improvements in the technology of offshoring causes job losses at the extensive margin where ever more tasks are performed abroad, but it also causes job creation from cost-savings associated with enhanced trade in tasks. We identify conditions under which job creation dominates job destruction. We also show that employment may follow a non-monotonic pattern of adjustment to successive improvements in the technology of offshoring.

Suggested Citation

  • Wilhelm Kohler & Jens Wrona, 2010. "Offshoring Tasks, yet Creating Jobs?," CESifo Working Paper Series 3019, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3019
    as

    Download full text from publisher

    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3019.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Trade and unemployment: What do the data say?," European Economic Review, Elsevier, vol. 55(6), pages 741-758, August.
    2. Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(4), pages 641-665, December.
    3. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages 166-185, March.
    4. Daniel Cohen, 2008. "Three Lectures on Post-Industrial Society," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033836, January.
    5. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April.
    6. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "The rise of offshoring: it's not wine for cloth anymore," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 59-102.
    7. Hartmut Egger & Udo Kreickemeier, 2017. "International Fragmentation: Boon or Bane for Domestic Employment?," World Scientific Book Chapters,in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 9, pages 237-263 World Scientific Publishing Co. Pte. Ltd..
    8. Keuschnigg, Christian & Ribi, Evelyn, 2009. "Outsourcing, unemployment and welfare policy," Journal of International Economics, Elsevier, vol. 78(1), pages 168-176, June.
    9. repec:pri:cepsud:119blinder is not listed on IDEAS
    10. Becker, Sascha O. & Ekholm, Karolina & Muendler, Marc-Andreas, 2013. "Offshoring and the onshore composition of tasks and skills," Journal of International Economics, Elsevier, vol. 90(1), pages 91-106.
    11. Robert C. Feenstra, 2010. "Offshoring in the Global Economy: Microeconomic Structure and Macroeconomic Implications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262013835, January.
    12. Philipp Harms & Oliver Lorz & Dieter Urban, 2012. "Offshoring along the production chain," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 93-106, February.
    13. Gregory Mankiw, N. & Swagel, Phillip, 2006. "The politics and economics of offshore outsourcing," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 1027-1056, July.
    14. Wright, Greg C., 2014. "Revisiting the employment impact of offshoring," European Economic Review, Elsevier, vol. 66(C), pages 63-83.
    15. Baldwin, Richard & Robert-Nicoud, Frédéric, 2014. "Trade-in-goods and trade-in-tasks: An integrating framework," Journal of International Economics, Elsevier, vol. 92(1), pages 51-62.
    16. Julio J. Rotemberg, 2008. "Cyclical Wages in a Search-and-Bargaining Model with Large Firms," NBER Chapters,in: NBER International Seminar on Macroeconomics 2006, pages 65-114 National Bureau of Economic Research, Inc.
    17. Ingo Geishecker & Holger Görg, 2008. "Winners and losers: a micro-level analysis of international outsourcing and wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 243-270, February.
    18. Alan S. Blinder, 2005. "Fear of Offshoring," Working Papers 83, Princeton University, Department of Economics, Center for Economic Policy Studies..
    19. Alexander Hijzen & Holger Görg & Robert C. Hine, 2005. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Economic Journal, Royal Economic Society, vol. 115(506), pages 860-878, October.
    20. Markusen, James R., 2013. "Expansion of trade at the extensive margin: A general gains-from-trade result and illustrative examples," Journal of International Economics, Elsevier, vol. 89(1), pages 262-270.
    21. Mary Amiti & Shang-Jin Wei, 2005. "Fear of service outsourcing: is it justified?," Economic Policy, CEPR;CES;MSH, vol. 20(42), pages 308-347, April.
    22. Paul R. Krugman, 2008. "Trade and Wages, Reconsidered," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 103-154.
    23. Gene M. Grossman & Esteban Rossi‐Hansberg, 2012. "Task Trade Between Similar Countries," Econometrica, Econometric Society, vol. 80(2), pages 593-629, March.
    24. Hartmut Egger & Peter Egger, 2006. "International Outsourcing and the Productivity of Low-Skilled Labor in the EU," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 98-108, January.
    25. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
    26. Wilhelm Kohler, 2004. "Aspects of International Fragmentation," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 793-816, November.
    27. Hartmut Egger & Peter Egger, 2000. "Outsourcing and skill-specific employment in a small economy: Austria and the fall of the Iron Curtain," Economics working papers 2000-24, Department of Economics, Johannes Kepler University Linz, Austria.
    28. Mary Amiti & Shang-Jin Wei, 2009. "Service Offshoring and Productivity: Evidence from the US," The World Economy, Wiley Blackwell, vol. 32(2), pages 203-220, February.
    29. Deardorff, Alan V., 2006. "Comment on Mankiw and Swagel, "The politics and economics of offshore outsourcing"," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 1057-1061, July.
    30. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    31. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
    32. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    33. Mitra, Devashish & Ranjan, Priya, 2010. "Offshoring and unemployment: The role of search frictions labor mobility," Journal of International Economics, Elsevier, vol. 81(2), pages 219-229, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hogrefe, Jan & Yao, Yao, 2012. "Offshoring and labor income risk," ZEW Discussion Papers 12-025, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Schmerer, Hans-Jörg, 2014. "Foreign direct investment and search unemployment: Theory and evidence," International Review of Economics & Finance, Elsevier, vol. 30(C), pages 41-56.
    3. Baumgarten, Daniel & Geishecker, Ingo & Görg, Holger, 2013. "Offshoring, tasks, and the skill-wage pattern," European Economic Review, Elsevier, vol. 61(C), pages 132-152.
    4. Vallizadeh, Ehsan & Muysken, Joan & Ziesemer, Thomas, 2015. "Offshoring of medium-skill jobs, polarization, and productivity effect : implications for wages and low-skill unemployment," IAB Discussion Paper 201507, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Jan Hogrefe & Yao Yao, 2016. "Offshoring and labor income risk: an empirical investigation," Empirical Economics, Springer, vol. 50(3), pages 1045-1063, May.
    6. Michael Koch, 2014. "Skills, Tasks and the Scarcity of Talent in a Global Economy," Working Papers 145, Bavarian Graduate Program in Economics (BGPE).
    7. Schmerer, Hans-Jörg, 2012. "FDI, skill-specific unemployment, and institutional spillover effects," Economics Discussion Papers 2012-2, Kiel Institute for the World Economy (IfW).
    8. Koch, Michael, 2014. "Skills, Tasks and the Scarcity of Talent in a Global Economy," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100337, Verein für Socialpolitik / German Economic Association.
    9. Schwörer, Tillmann, 2012. "Offshoring, domestic outsourcing, and productivity: Evidence for a number of European countries," Kiel Working Papers 1786, Kiel Institute for the World Economy (IfW).
    10. Brändle, Tobias & Kalweit, René, 2016. "The Employment Effects of the EU Eastern Enlargement in Germany," Annual Conference 2016 (Augsburg): Demographic Change 145502, Verein für Socialpolitik / German Economic Association.
    11. Vallizadeh, Ehsan & Muysken, Joan & Ziesemer, Thomas, 2016. "Offshoring Medium-Skill Tasks, Low-Skill Unemployment and the Skill-Wage Structure," MPRA Paper 75581, University Library of Munich, Germany.
    12. Lutz G. Arnold & Stefanie Trepl, 2011. "Taking Public Opinion Seriously: A General Equilibrium Model of Low-Wage Competition, Offshoring, and Unemployment," Working Papers 101, Bavarian Graduate Program in Economics (BGPE).
    13. repec:spr:manint:v:57:y:2017:i:6:d:10.1007_s11575-017-0322-2 is not listed on IDEAS
    14. Schmerer, Hans-Jörg, 2012. "Skill-biased labor market reforms and international competitiveness," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-39.
    15. Christensen, Jonas Gade, 2011. "Productivity, Size, and the Disintegration of Industrial Production," Working Papers in Economics 07/11, University of Bergen, Department of Economics.
    16. Tillmann Schwörer, 2013. "Offshoring, domestic outsourcing and productivity: evidence for a number of European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(1), pages 131-149, March.
    17. Mitra Devashish & Ranjan Priya, 2013. "Fairness, Search Frictions, and Offshoring," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(1), pages 137-172, April.
    18. Lutz Arnold & Stefanie Trepl, 2015. "A North-South Trade Model of Offshoring and Unemployment," Open Economies Review, Springer, vol. 26(5), pages 999-1039, November.
    19. Thede, Susanna, 2012. "A Simple Model of Trade, Job Task Offshoring and Social Insurance," Working Papers 2012:16, Lund University, Department of Economics.

    More about this item

    Keywords

    offshoring; trade in tasks; unemployment; search and matching;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3019. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe). General contact details of provider: http://edirc.repec.org/data/cesifde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.