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Offshoring and migration in a world with policy spillovers

  • Cosimo BEVERELLI


  • Gianluca OREFICE


  • Nadia ROCHA


Using a trade in task model that extends the one of Ottaviano, Peri, and Wright (2010) to three countries, we study the effects of immigration and offshoring costs on employment. Tasks can be performed by migrants, offshore workers or natives, with sorting along a continuum of task determined by cost minimization. For two alternative specifications of the model - one in which the ordering of low-end and intermediate tasks is pinned down by worker characteristic and one in which it is pinned down by country characteristics - we derive testable predictions on `direct', `domestic spillover' and `international spillover' effects of migration and offshoring costs on the number of migrants and the number of offshore workers. Direct effects refer to the impact of own migration (offshoring) costs on number of migrant (offshore) workers. Domestic spillovers capture the effect of own migration (offshoring) costs on the number of offshore (migrant) workers. International spillovers refer to the direct effect of country j's migration (offshoring) costs on country i's migration (offhoring), and to the indirect effect of country j's migration (offshoring) costs on country i's offshoring (migration). Overall, we find strong support of negative direct effects, mild support for domestic spillover effects and very limited support for international spillover effect, leading to conclude that the second model specification is a better fit of the data. Two broad policy implications follow. First, host countries can affect the number of migrants by acting both on bilateral migration policies and on bilateral offshoring policies. Second, de jure discriminatory policies on migration or offshoring need not be de facto so.

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Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2011-25.

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Date of creation: 05 Nov 2011
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Handle: RePEc:mil:wpdepa:2011-25
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  1. Subhayu Bandyopadhyay & Howard J. Wall, 2005. "Immigration and Outsourcing: A General Equilibrium Analysis," Working Papers 05-08 Classification-, Department of Economics, West Virginia University.
  2. Giovanni Peri & Chad Sparber, 2009. "Task Specialization, Immigration, and Wages," American Economic Journal: Applied Economics, American Economic Association, vol. 1(3), pages 135-69, July.
  3. William W. Olney, 2013. "Immigration And Firm Expansion," Journal of Regional Science, Wiley Blackwell, vol. 53(1), pages 142-157, 02.
  4. Maurice Kugler & Hillel Rapoport, 2005. "Skilled Emigration, Business Networks and Foreign Direct Investment," CESifo Working Paper Series 1455, CESifo Group Munich.
  5. Heather Antecol & Deborah A. Cobb-Clark & Stephen J. Trejo, 2003. "Immigration Policy and the Skills of Immigrants to Australia, Canada, and the United States," Journal of Human Resources, University of Wisconsin Press, vol. 38(1).
  6. Wright, Greg C., 2014. "Revisiting the employment impact of offshoring," European Economic Review, Elsevier, vol. 66(C), pages 63-83.
  7. Javorcik, Beata S. & Özden, Çaglar & Spatareanu, Mariana & Neagu, Cristina, 2011. "Migrant networks and foreign direct investment," Journal of Development Economics, Elsevier, vol. 94(2), pages 231-241, March.
  8. Gianmarco I.P. Ottaviano & Giovanni Peri & Greg C. Wright, 2010. "Immigration, Offshoring and American Jobs," NBER Working Papers 16439, National Bureau of Economic Research, Inc.
  9. Alan S. Blinder & Alan B. Krueger, 2009. "Alternative Measures of Offshorability: A Survey Approach," Working Papers 1169, Princeton University, Department of Economics, Center for Economic Policy Studies..
  10. Abdih, Yasser & Chami, Ralph & Dagher, Jihad & Montiel, Peter, 2012. "Remittances and Institutions: Are Remittances a Curse?," World Development, Elsevier, vol. 40(4), pages 657-666.
  11. Barry R. Chiswick & Anh T. Le & Paul W. Miller, 2008. "How Immigrants Fare across the Earnings Distribution in Australia and the United States," ILR Review, Cornell University, ILR School, vol. 61(3), pages 353-373, April.
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