IDEAS home Printed from https://ideas.repec.org/p/lbo/lbowps/2013_12.html
   My bibliography  Save this paper

The Skill Content of Offshoring and Growth

Author

Listed:
  • Andreas Hoefele

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

Abstract

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.

Suggested Citation

  • Andreas Hoefele, 2013. "The Skill Content of Offshoring and Growth," Discussion Paper Series 2013_12, Department of Economics, Loughborough University, revised Oct 2013.
  • Handle: RePEc:lbo:lbowps:2013_12
    as

    Download full text from publisher

    File URL: http://www.lboro.ac.uk/departments/sbe/RePEc/lbo/lbowps/LBOWPS_WP2013_12_Hoefele.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Edward E Leamer & Michael Storper, 2001. "The Economic Geography of the Internet Age," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(4), pages 641-665, December.
    2. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages 166-185, March.
    3. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    4. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 369-405.
    5. 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, Oxford University Press, vol. 114(3), pages 907-940.
    6. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Firm Heterogeneity, Contract Enforcement, and the Industry Dynamics of Offshoring," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 629-653, December.
    7. 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.
    8. Alireza Naghavi & Gianmarco Ottaviano, 2009. "Offshoring and product innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(3), pages 517-532, March.
    9. 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 109-124, February.
    10. 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.
    11. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    12. Peter Gustafsson & Paul Segerstrom, 2010. "Trade Liberalization and Productivity Growth," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 207-228, May.
    13. Dinopoulos, Elias & Unel, Bulent, 2011. "Quality heterogeneity and global economic growth," European Economic Review, Elsevier, vol. 55(5), pages 595-612, June.
    14. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557-557.
    15. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    16. Grossman, Gene M. & Helpman, Elhanan, 1991. "Trade, knowledge spillovers, and growth," European Economic Review, Elsevier, vol. 35(2-3), pages 517-526, April.
    17. Alan S. Blinder, 2009. "How Many US Jobs Might be Offshorable?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(2), pages 41-78, April.
    18. 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.
    19. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    20. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philipp Ehrl, 2018. "Task trade and employment patterns: The offshoring and onshoring of Brazilian firms," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(3), pages 235-266, April.
    2. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
    3. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2020. "Wage response to global production links: evidence for workers from 28 European countries (2005–2014)," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 769-801, November.
    4. Baumgarten, Daniel & Irlacher, Michael & Koch, Michael, 2020. "Offshoring and non-monotonic employment effects across industries in general equilibrium," European Economic Review, Elsevier, vol. 130(C).
    5. Gueyon Kim & Dohyeon Lee, 2020. "Offshoring and Segregation by Skill: Theory and Evidence," Working Papers 2020-073, Human Capital and Economic Opportunity Working Group.
    6. Vallizadeh E. & Muysken J. & Ziesemer T.H.W., 2015. "Offshoring of medium-skill jobs, polarization, and productivity effect: Implications for wages and low-skill unemployment," MERIT Working Papers 2015-004, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Sebastian Benz, 2012. "Trading Tasks: A Dynamic Theory of Offshoring," ifo Working Paper Series 150, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    8. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2019. "Global Value Chains and Wages: Multi-Country Evidence from Linked Worker-Industry Data," Open Economies Review, Springer, vol. 30(3), pages 505-539, July.
    9. Tobias Brändle & Andreas Koch, 2017. "Offshoring and Outsourcing Potentials: Evidence from German Micro-Level Data," The World Economy, Wiley Blackwell, vol. 40(9), pages 1775-1806, September.
    10. Dirk Bursian & Arne J. Nagengast, 2020. "Offshoring And The Polarization Of The Demand For Capital," Economic Inquiry, Western Economic Association International, vol. 58(1), pages 260-282, January.
    11. Vallizadeh, Ehsan & Muysken, Joan & Ziesemer, Thomas, 2016. "Offshoring medium-skill tasks, low-skill unemployment and the skill-wage structure," MERIT Working Papers 2016-070, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    12. Baldwin, Richard & Robert-Nicoud, Frédéric, 2014. "Trade-in-goods and trade-in-tasks: An integrating framework," Journal of International Economics, Elsevier, vol. 92(1), pages 51-62.
    13. Linda Andersson & Patrik Karpaty & Selen Savsin, 2017. "Labour Demand, Offshoring and Inshoring: Evidence from Swedish Firm-level Data," The World Economy, Wiley Blackwell, vol. 40(2), pages 240-274, February.
    14. Tobias Brändle & Andreas Koch, 2015. "Offshoreability and wages. Evidence from German task data," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(2), pages 189-216, June.
    15. Gagliardi, Luisa & Iammarino, Simona & Rodríguez-Pose, Andrés, 2015. "Offshoring and the Geography of Jobs in Great Britain," CEPR Discussion Papers 10855, C.E.P.R. Discussion Papers.
    16. Daniel CHIQUIAR & Martín TOBAL & Renato YSLAS, 2019. "Measuring and understanding trade in service tasks," International Labour Review, International Labour Organization, vol. 158(1), pages 169-190, March.
    17. Eppinger, Peter S., 2019. "Service offshoring and firm employment," Journal of International Economics, Elsevier, vol. 117(C), pages 209-228.
    18. Wilhelm Kohler & Jens Wrona, 2010. "Offshoring Tasks, yet Creating Jobs?," CESifo Working Paper Series 3019, CESifo.
    19. Tobias Brändle, 2015. "Is offshoring linked to offshoring potential? Evidence from German linked employer–employee data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(4), pages 735-766, November.
    20. Neil Foster-McGregor & Robert Stehrer & Gaaitzen Vries, 2013. "Offshoring and the skill structure of labour demand," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(4), pages 631-662, December.

    More about this item

    Keywords

    Offshoring; Trade in Tasks; Growth; Skill Differences;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lbo:lbowps:2013_12. 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: . General contact details of provider: https://edirc.repec.org/data/delbouk.html .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Huw Edwards (email available below). General contact details of provider: https://edirc.repec.org/data/delbouk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.