Offshoring: General Equilibrium Effects on Wages, Production and Trade

Richard Baldwin and Frédéric Robert-Nicoud

No 6218, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A simple model of offshoring, which depicts offshoring as ‘shadow migration,’ permits straightforward derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems, so econometricians who ignore offshoring might reject the Heckscher-Ohlin 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. The model is extended to allow for two-way offshoring between similar nations, and to allow for monopolistic competition.

Keywords: inter-industry trade; intra-industry trade; offshoring; shadow migration; trade theorems (search for similar items in EconPapers)
JEL-codes: F02 F12 L22 R11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-int
Date: 2007-04
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Related works:
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 (2008)
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