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Trade, tasks, and training: The effect of offshoring on individual skill upgrading

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  • Hogrefe, Jan
  • Wrona, Jens

Abstract

We offer a theoretical explanation and empirical evidence for a positive link between increased offshoring and individual skill upgrading. Skill upgrading takes the form of on-thejob training, complementing the existing literature, which mainly focuses on the retraining of workers after a direct job displacement through offshoring. To establish a link between offshoring and on-the-job training, we introduce an individual skill upgrading margin into a variant of the Grossman and Rossi-Hansberg (2008) model of offshoring. By scaling up worker's wages, offshoring in our model creates previously unexploited skill upgrading possibilities and, thus, leads to more on-the-job training. Using data from German manufacturing, we establish a causal link between the growth in industry-level offshoring and an increased on-the-job training propensity at the individual level.

Suggested Citation

  • Hogrefe, Jan & Wrona, Jens, 2014. "Trade, tasks, and training: The effect of offshoring on individual skill upgrading," DICE Discussion Papers 148, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:148
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    2. Akay, Alpaslan & Savsin, Selen, 2022. "Offshoring and well-being of workers," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 388-407.
    3. Borrs, Linda & Eppelsheimer, Johann, 2020. "The effects of foreign direct investment on job stability: Upgrades, downgrades, and separations," IAB-Discussion Paper 202024, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Machin, Stephen & Costa, Rui & Dhingra, Swati, 2019. "Trade and Worker Deskilling," CEPR Discussion Papers 13768, C.E.P.R. Discussion Papers.
    5. Koerner, Konstantin & Borrs, Linda & Eppelsheimer, Johann, 2023. "FDI and onshore job stability: Upgrades, downgrades, and separations in multinationals," European Economic Review, Elsevier, vol. 152(C).
    6. Zierahn, Ulrich Theodor & Arntz, Melanie & Hogrefe, Jan, 2015. "Heterogeneous Labor Market Adjustments to Offshoring in European Regions," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112976, Verein für Socialpolitik / German Economic Association.
    7. Paulo Bastos & Joana Silva & Rafael Proença, 2016. "Exports and Job Training," Review of International Economics, Wiley Blackwell, vol. 24(4), pages 737-756, September.
    8. Wilhelm Kohler & Jens Wrona, 2021. "Trade in tasks: Revisiting the wage and employment effects of offshoring," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 648-676, May.
    9. Jan Hogrefe & Yao Yao, 2016. "Offshoring and labor income risk: an empirical investigation," Empirical Economics, Springer, vol. 50(3), pages 1045-1063, May.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

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