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Offshoring tasks, yet creating jobs?

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  • Kohler, Wilhelm
  • Wrona, Jens

Abstract

The policy debate views offshoring as job destruction. Theoretical models of offshoring mostly assume full employment. We develop a model of task trade that allows for equilibrium unemployment. In this model, there are two margins of adjustment. At the extensive margin, moving tasks offshore destroys jobs. At the intensive margin, due to higher productivity of labor in domestic tasks it creates jobs. Exploring these conditions in detail, we identify the potential of non-monotonic adjustment: Early stages of offshoring always lead to higher unemployment, while later stages may entail net job creation. We highlight this potential through numerical simulations.

Suggested Citation

  • Kohler, Wilhelm & Wrona, Jens, 2011. "Offshoring tasks, yet creating jobs?," University of Tübingen Working Papers in Business and Economics 12, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
  • Handle: RePEc:zbw:tuewef:12
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jan Hogrefe & Yao Yao, 2016. "Offshoring and labor income risk: an empirical investigation," Empirical Economics, Springer, vol. 50(3), pages 1045-1063, May.
    2. Brändle, Tobias & Kalweit, René, 2016. "The Employment Effects of the EU Eastern Enlargement in Germany," VfS Annual Conference 2016 (Augsburg): Demographic Change 145502, Verein für Socialpolitik / German Economic Association.
    3. Susanna Thede, 2018. "A model of trade, task offshoring and social insurance," International Economics and Economic Policy, Springer, vol. 15(4), pages 787-802, October.
    4. 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).
    5. Vallizadeh, Ehsan & Muysken, Joan & Ziesemer, Thomas, 2016. "Offshoring Medium-Skill Tasks, Low-Skill Unemployment and the Skill-Wage Structure," MPRA Paper 75581, University Library of Munich, Germany.
    6. Ljubica Nedelkoska & Frank Neffke, 2019. "Skill Mismatch and Skill Transferability: Review of Concepts and Measurements," Papers in Evolutionary Economic Geography (PEEG) 1921, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jun 2019.

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    More about this item

    Keywords

    Offshoring; Trade in Tasks; Unemployment; Non-monotonicity;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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