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Low-Skill Offshoring: Labor Market Policies and Welfare Effects
[Internationales Outsourcing von gering qualifizierter Arbeit: Arbeitsmarktpolitik und Wohlfahrtseffekte]

Author

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  • Agnese, Pablo

    (Department of Economics of the Duesseldorf University of Applied Sciences)

  • Hromcová, Jana

Abstract

We analyze the effects of low-skill workers offshoring on the welfare of the economy. In the context of a matching model with different possible equilibria, we discuss two policies that could potentially outweigh the negative welfare effects of offshoring, namely, an increase of the unemployment benefits and the flexibilization of the labor market. Our results suggest that, while both policy instruments can theoretically bring the economy back to previous welfare levels, careful thought should be given to the practicability of either measure. In particular, it would take a major increase of the unemployment benefits but only a small reduction in the vacancy cost to compensate for the negative welfare effects of offshoring. In addition, we also find that the compensation can be achieved by an upgrading of the low-skill workers that varies with the equilibria.

Suggested Citation

  • Agnese, Pablo & Hromcová, Jana, 2014. "Low-Skill Offshoring: Labor Market Policies and Welfare Effects [Internationales Outsourcing von gering qualifizierter Arbeit: Arbeitsmarktpolitik und Wohlfahrtseffekte]," Duesseldorf Working Papers in Applied Management and Economics 30, Duesseldorf University of Applied Sciences.
    • Handle: RePEc:ddf:wpaper:30
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    References listed on IDEAS

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    Cited by:

    1. Agnese, Pablo & Hromcová, Jana, 2016. "Low-skill offshoring and welfare compensation policies," Economic Modelling, Elsevier, vol. 52(PB), pages 408-426.

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    More about this item

    Keywords

    Internationales Outsourcing; Offshoring; Wohlfahrt; Lohnersatzleistungen; Arbeitsmarktflexibilität; Höherqualifizierung; 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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