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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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File URL: http://www.lboro.ac.uk/departments/sbe/RePEc/lbo/lbowps/LBOWPS_WP2013_12_Hoefele.pdf
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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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Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html

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  1. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
  2. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  3. Alan S. Blinder, 2009. "How Many US Jobs Might be Offshorable?," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(2), pages 41-78, April.
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  5. Becker, Sascha & Ekholm, Karolina & Muendler, Marc-Andreas, 2009. "Offshoring and the Onshore Composition of Tasks and Skills," Stirling Economics Discussion Papers 2009-18, University of Stirling, Division of Economics.
  6. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
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  9. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Offshoring and product innovation," Economic Theory, Springer, vol. 38(3), pages 517-532, March.
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  13. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  14. Gustafsson, Peter & Segerstrom, Paul, 2006. "Trade Liberalization and Productivity Growth," CEPR Discussion Papers 5894, C.E.P.R. Discussion Papers.
  15. Alireza Naghavi & Gianmarco I. P. Ottaviano, 2009. "Firm Heterogeneity, Contract Enforcement, and the Industry Dynamics of Offshoring," Development Working Papers 282, Centro Studi Luca d\'Agliano, University of Milano.
  16. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
  17. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 907-940, August.
  18. Gene M. Grossman & Elhanan Helpman, 1990. "Trade, Knowledge Spillovers, and Growth," NBER Working Papers 3485, National Bureau of Economic Research, Inc.
  19. 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.
  20. Bulent Unel & Elias Dinopoulos, . "Quality Heterogeneity and Global Economic Growth," Departmental Working Papers 2009-06, Department of Economics, Louisiana State University.
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