Offshoring: General Equilibrium Effects on Wages, Production and Trade

Richard Baldwin and Frederic Robert-Nicoud

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: A simple model of offshoring is used to integrate the complex gallery of results that exist in the theoretical offshoring/fragmentation literature. The paper depicts offshoring as 'shadow migration' and shows that this allows straightforward derivation of the general equilibrium effects on prices, wages, production and trade (necessary and sufficient conditions are provided). We show that offshoring requires modification of the four HO theorems, so econometricians who ignore offshoring might reject the HO theorem when a properly specified version held in the data. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting.

Keywords: Offshoring; Shadow migration; Inter-industry trade; Intra-industry trade; Trade theorems (search for similar items in EconPapers)
JEL-codes: F02 F12 L22 R11 (search for similar items in EconPapers)
Date: 2007-05
New Economics Papers: this item is included in nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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https://cep.lse.ac.uk/pubs/download/dp0794.pdf (application/pdf)

Related works:
Working Paper: Offshoring: General Equilibrium Effects on Wages, Production and Trade (2008)
Working Paper: Offshoring: General Equilibrium Effects on Wages, Production and Trade (2007)
Working Paper: Offshoring: general equilibrium effects on wages, production and trade (2007)
Working Paper: Offshoring: General Equilibrium Effects on Wages, Production and Trade (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0794

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