Offshoring and Unemployment: The Role of Search Frictions and Labor Minority
In this paper, in order to study the impact of offshoring on sectoral and economy wide rates of unemployment, we construct a two sector general equilibrium model in which unemployment is caused by search frictions. The model shows that wage increases and sectoral unemployment decreases upon offshoring in the presence of perfect intersectoral labor mobility. If, as a result, labor moves to the sector with the lower (or equal) vacancy costs, there is an unambiguous decrease in economy wide unemployment. With imperfect intersectoral labor mobility, unemployment in the offshoring sector can rise, with an unambiguous unemployment reduction in the non-offshoring sector. Imperfect labor mobility can result in a mixed equilibrium in which only some firms in the industry offshore, with unemployment in this sector rising. [IZA DP no. 4136]
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Elhanan Helpman & Oleg Itskhoki, 2010.
"Labour Market Rigidities, Trade and Unemployment,"
Review of Economic Studies,
Oxford University Press, vol. 77(3), pages 1100-1137.
- Elhanan Helpman & Oleg Itskhoki, 2007. "Labor Market Rigidities, Trade and Unemployment," NBER Working Papers 13365, National Bureau of Economic Research, Inc.
- Helpman, Elhanan & Itskhoki, Oleg, 2009. "Labor Market Rigidities, Trade, and Unemployment," CEPR Discussion Papers 7502, C.E.P.R. Discussion Papers.
- Helpman, Elhanan & Itskhoki, Oleg, 2010. "Labour Market Rigidities, Trade and Unemployment," Scholarly Articles 25586655, Harvard University Department of Economics.
- Oleg Itskhoki & Elhanan Helpman, 2008. "Labor Market Rigidities, Trade and Unemployment," 2008 Meeting Papers 690, Society for Economic Dynamics.
- Karabay, Bilgehan & McLaren, John, 2010. "Trade, offshoring, and the invisible handshake," Journal of International Economics, Elsevier, vol. 82(1), pages 26-34, September.
- Bilgehan Karabay & John McLaren, 2009. "Trade, Offshoring, and the Invisible Handshake," NBER Working Papers 15048, National Bureau of Economic Research, Inc.
- Mary Amiti & Shang-Jin Wei, 2005. "Fear of service outsourcing: is it justified?," Economic Policy, CEPR;CES;MSH, vol. 20(42), pages 308-347, 04.
- Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing; Is It Justified?," IMF Working Papers 04/186, International Monetary Fund.
- Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is It Justified?," NBER Working Papers 10808, National Bureau of Economic Research, Inc.
- Cahuc, Pierre & Wasmer, Etienne, 2001. "Does Intrafirm Bargaining Matter In The Large Firm'S Matching Model?," Macroeconomic Dynamics, Cambridge University Press, vol. 5(05), pages 742-747, November.
- Artuç, Erhan & Chaudhuri, Shubham & McLaren, John, 2008. "Delay and dynamics in labor market adjustment: Simulation results," Journal of International Economics, Elsevier, vol. 75(1), pages 1-13, May.
- Erhan Artuç & Shubham Chaudhuri & John McLaren, 2007. "Delay and Dynamics in Labor Market Adjustment: Simulation Results," Koç University-TUSIAD Economic Research Forum Working Papers 0703, Koc University-TUSIAD Economic Research Forum.
- Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
- Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 2004. "The Muddles over Outsourcing," International Trade 0408004, EconWPA.
- Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 375-410.
- Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
- Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, July.
- Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
- Bardhan, Ashok Deo & Kroll, Cynthia, 2003. "The New Wave of Outsourcing," Fisher Center for Real Estate & Urban Economics, Research Reports qt02f8z392, Fisher Center for Real Estate & Urban Economics, UC Berkeley. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ess:wpaper:id:2071. 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: (Padma Prakash)
If references are entirely missing, you can add them using this form.