IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Offshoring and Heterogeneous Firms: One Job Offshored, One Job Lost?

Offshoring has gained a significant momentum in recent years. Firm size appears to be the leading factor differentiating firms that offshore from those that do not. We present a model that blends offshoring, or trade in tasks, with a Melitz-style model of monopolistic competition with heterogeneous firms and show that this is indeed the case. Accounting for firm heterogeneity offers new tools for analyzing the effects of offshoring on the employment dynamics within an individual firm and at the aggregate sector level. We show that offshoring unambiguously reduces per-firm labour demand in smaller firms, but has ambiguous effects in larger firms. As a result, irrespective of whether or not the number of firms operating in the offshoring nation increases, the overall sector employment may increase or decrease. Policies promoting free trade have a significant role to play in job creation. The model also permits a straightforward derivation of positive and normative effects of offshoring: trade in tasks increases productivity of active firms and improves welfare in the offshoring nation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIWP28-2007.pdf
Download Restriction: no

Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 28-2007.

as
in new window

Length: 55
Date of creation: Dec 2007
Date of revision: Dec 2007
Handle: RePEc:gii:giihei:heiwp28-2007
Contact details of provider: Postal: P.O. Box 36, 1211 Geneva 21
Phone: ++41 22 731 17 30
Fax: ++41 22 738 43 06
Web page: http://www.graduateinstitute.ch/economicsEmail:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Alexander Hijzen & Paul Swaim, 2007. "Does offshoring reduce industry employment?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 201(1), pages 86-96, July.
  2. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  3. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing; Is it Justified?," IMF Working Papers 04/186, International Monetary Fund.
  4. Deardorff, A.V., 1998. "Fragmentation Across Cones," Working Papers 427, Research Seminar in International Economics, University of Michigan.
  5. Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 323-346, June.
  6. Catherine L. Mann, 2003. "Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth," Policy Briefs PB03-11, Peterson Institute for International Economics.
  7. Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November.
  8. Baldwin, Richard & Forslid, Rikard, 2004. "Trade Liberalization with Heterogenous Firms," CEPR Discussion Papers 4635, C.E.P.R. Discussion Papers.
  9. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  10. Deardorff, Alan V., 2001. "Fragmentation in simple trade models," The North American Journal of Economics and Finance, Elsevier, vol. 12(2), pages 121-137, July.
  11. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Offshoring: General Equilibrium Effects on Wages, Production and Trade," CEP Discussion Papers dp0794, Centre for Economic Performance, LSE.
  12. Amiti, Mary & Wei, Shang-Jin, 2006. "Service Offshoring, Productivity and Employment: Evidence from the US," CEPR Discussion Papers 5475, C.E.P.R. Discussion Papers.
  13. Alexander Hijzen & Tomohiko Inui & Yasuyuki Todo, 2010. "Does Offshoring Pay? Firm-Level Evidence From Japan," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 880-895, October.
  14. Karsten Bjerring Olsen, 2006. "Productivity Impacts of Offshoring and Outsourcing: A Review," OECD Science, Technology and Industry Working Papers 2006/1, OECD Publishing.
  15. Findlay, Ronald & Jones, Ronald, 2000. "Factor bias and technical progress," Economics Letters, Elsevier, vol. 68(3), pages 303-308, September.
  16. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  17. Jacob Funk Kirkegaard, 2007. "Offshoring, Outsourcing, and Production Relocation—Labor-Market Effects in the OECD Countries and Developing Asia," Working Paper Series WP07-2, Peterson Institute for International Economics.
  18. Cosimo Beverelli, 2007. "Offshoring and Manufacturing Employment: A General Equilibrium Analysis," IHEID Working Papers 25-2007, Economics Section, The Graduate Institute of International Studies, revised 11 Oct 2007.
  19. repec:rus:hseeco:122439 is not listed on IDEAS
  20. Gorg, Holger & Hanley, Aoife, 2005. "Labour demand effects of international outsourcing: Evidence from plant-level data," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 365-376.
  21. Egger, Peter & Pfaffermayr, Michael & Wolfmayr-Schnitzer, Yvonne, 2001. "The international fragmentation of Austrian manufacturing: The effects of outsourcing on productivity and wages," The North American Journal of Economics and Finance, Elsevier, vol. 12(3), pages 257-272, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:gii:giihei:heiwp28-2007. 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: (Maria Sokolova)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.