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Offshoring Domestic Jobs

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  • Wrona, Jens
  • Egger, Hartmut
  • Kreickemeier, Udo

Abstract

We set up a two-country general equilibrium model, in which heterogeneous firms from one country (the source country) can offshore routine tasks to a low-wage host country. The most productive firms self-select into offshoring, and the impact on welfare in the source country can be positive or negative, depending on the share of firms engaged in offshoring. Each firm is run by an entrepreneur, and inequality between entrepreneurs and workers as well as intragroup inequality among entrepreneurs is higher with offshoring than in autarky. All results hold in a model extension with firm-level rent sharing, which results in aggregate unemployment. In this extended model, offshoring furthermore has non-monotonic effects on unemployment and intra-group inequality among workers. The paper also offers a calibration exercise to quantify the effects of offshoring.

Suggested Citation

  • Wrona, Jens & Egger, Hartmut & Kreickemeier, Udo, 2013. "Offshoring Domestic Jobs," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79995, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:79995
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    References listed on IDEAS

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    Cited by:

    1. Inoue, Atsushi & Jin, Lu & Rossi, Barbara, 2017. "Rolling window selection for out-of-sample forecasting with time-varying parameters," Journal of Econometrics, Elsevier, vol. 196(1), pages 55-67.
    2. Van Biesebroeck, Johannes & Zhang, Lijun, 2014. "Interdependent product cycles for globally sourced intermediates," Journal of International Economics, Elsevier, vol. 94(1), pages 143-156.
    3. Hummels, David & Munch, Jakob R. & Xiang, Chong, 2016. "Offshoring and Labor Markets," IZA Discussion Papers 9741, Institute for the Study of Labor (IZA).
    4. Eckel, Carsten & Irlacher, Michael, 2017. "Multi-product offshoring," European Economic Review, Elsevier, vol. 94(C), pages 71-89.
    5. Stella Capuano & Hartmut Egger & Michael Koch & Hans-Jörg Schmerer, 2017. "Offshoring and Firm Overlap," CESifo Working Paper Series 6361, CESifo Group Munich.
    6. Zierahn, Ulrich Theodor & Arntz, Melanie & Hogrefe, Jan, 2015. "Heterogeneous Labor Market Adjustments to Offshoring in European Regions," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112976, Verein für Socialpolitik / German Economic Association.
    7. Laurens Cherchye & Thomas Demuynck & Bram De Rock & Marijn Verschelde, 2018. "Nonparametric Production Analysis with Unobserved Heterogeneity in Productivity," Working Papers ECARES 2018-25, ULB -- Universite Libre de Bruxelles.
    8. 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.
    9. Capuano, Stella & Egger, Hartmut & Koch, Michael & Schmerer, Hans-Jörg, 2017. "Offshoring and firm overlap," IAB Discussion Paper 201706, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2015. "Offshoring and Directed Technical Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 84-122, July.
    11. Groizard, Jose L. & Ranjan, Priya & Rodriguez-Lopez, Antonio, 2014. "Offshoring and jobs: The myriad channels of influence," European Economic Review, Elsevier, vol. 72(C), pages 221-239.
    12. Schmerer, Hans-Jörg & Capuano, Stella & Egger, Hartmut & Koch, Michael, 2015. "Offshoring and Firm Overlap," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113147, Verein für Socialpolitik / German Economic Association.
    13. Peter S. Eppinger, 2014. "Exploiting the Potential for Services Offshoring: Evidence from German Firms," IAW Discussion Papers 109, Institut für Angewandte Wirtschaftsforschung (IAW).
    14. repec:eee:inecon:v:111:y:2018:i:c:p:21-33 is not listed on IDEAS
    15. Jose L. Groizard & Priya Ranjan & Antonio Rodriguez-Lopez, 2013. "Offshoring, Exporting, and Jobs," DEA Working Papers 61, Universitat de les Illes Balears, Departament d'Economía Aplicada.
    16. 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.
    17. Hartmut Egger & Josef Falkinger, 2016. "Limited Consumer Attention in International Trade," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1096-1128, November.
    18. Irlacher, Michael & Baumgarten, Daniel & Koch, Michael, 2017. "Short- versus long-run effects of offshoring when sectors are heterogeneous," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168272, Verein für Socialpolitik / German Economic Association.

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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