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Offshoring and jobs: The myriad channels of influence

José Groizard, Priya Ranjan and Antonio Rodriguez-Lopez (jantonio@uci.edu)
Authors registered in the RePEc Author Service: Priyaranjan Jha

European Economic Review, 2014, vol. 72, issue C, 221-239

Abstract: Offshoring reallocates jobs inside firms, between firms, and across sectors, affecting the economy-wide unemployment rate. We study these channels in a model with labor market frictions and two sectors—a differentiated-good sector comprising heterogeneous firms that can offshore, and a homogeneous-good sector. A decline in offshoring costs affects intrafirm and intrasectoral reallocation of jobs in the differentiated-good sector through a selection effect, a productivity effect, and a job-relocation effect. The key parameters determining the impact of offshoring on jobs at various margins, as well as on the economy-wide unemployment rate, are the elasticity of substitution between inputs, the elasticity of substitution between varieties of differentiated goods, and the elasticity of demand for differentiated goods as a whole. Changes in search frictions affect unemployment both directly and through their interaction with offshoring.

Keywords: Heterogeneous firms; Offshoring costs; Search frictions; Unemployment (search for similar items in EconPapers)
JEL-codes: F12 F16 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:72:y:2014:i:c:p:221-239

DOI: 10.1016/j.euroecorev.2014.10.004

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