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The Skill Content of Offshoring and Growth

  • Andreas Hoefele

    (School of Business and Economics, Loughborough University, UK)

This paper analyses the effect of offshoring on the growth rate and welfare of a small open economy, taking into account the skill content of offshoring. The model exposes two opposing effects that increasing the extent of offshoring has on the growth rate. First, offshoring has a negative effect on the growth rate by increasing the relative wage of skilled labour and thus the costs of (skill intensive) research. Second, offshoring has a positive effect on the growth rate as it increases the effective labour endowments, which increases the size of the market and thus leads to more entry into research. Thus the overall effect of offshoring on the growth rate is ambiguous. The effect on welfare in the short run is positive, whereas the long-run welfare is ambiguous.

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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2013_12.

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Date of creation: Oct 2013
Date of revision: Oct 2013
Handle: RePEc:lbo:lbowps:2013_12
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  1. Naghavi, Alireza & Ottaviano, Gianmarco, 2006. "Offshoring and Product Innovation," CEPR Discussion Papers 6008, C.E.P.R. Discussion Papers.
  2. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
  3. Peter Gustafsson & Paul Segerstrom, 2010. "Trade Liberalization and Productivity Growth," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 207-228, 05.
  4. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
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  6. Gene M. Grossman & Elhanan Helpman, 1990. "Trade, Knowledge Spillovers, and Growth," NBER Working Papers 3485, National Bureau of Economic Research, Inc.
  7. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages C166-C185, 03.
  8. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  9. Geishecker, Ingo & Görg, Holger, 2007. "Winners and losers: A Micro-level Analysis of International Outsourcing and Wages," CEPR Discussion Papers 6484, C.E.P.R. Discussion Papers.
  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. David H. Autor & Frank Levy & Richard J. Murnane, 2001. "The Skill Content of Recent Technological Change: An Empirical Exploration," NBER Working Papers 8337, National Bureau of Economic Research, Inc.
  12. Alireza Naghavi & Gianmarco I.P. Ottaviano, 2009. "Firm Heterogeneity, Contract Enforcement, and the Industry Dynamics of Offshoring," KITeS Working Papers 022, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised May 2009.
  13. Edward E. Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," NBER Working Papers 8450, National Bureau of Economic Research, Inc.
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  15. repec:tpr:qjecon:v:114:y:1999:i:3:p:907-940 is not listed on IDEAS
  16. Alan S. Blinder, 2007. "How Many U.S. Jobs Might Be Offshorable?," Working Papers 60, Princeton University, Department of Economics, Center for Economic Policy Studies..
  17. repec:tpr:qjecon:v:106:y:1991:i:2:p:531-55 is not listed on IDEAS
  18. repec:tpr:qjecon:v:106:y:1991:i:2:p:369-405 is not listed on IDEAS
  19. Joseph F. Francois, 1990. "Trade in Producer Services and Returns Due to Specialization under Monopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 109-24, February.
  20. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  21. Dinopoulos, Elias & Unel, Bulent, 2011. "Quality heterogeneity and global economic growth," European Economic Review, Elsevier, vol. 55(5), pages 595-612, June.
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