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Wage stickiness, offshoring and unemployment

Marta Aloi () and Andreas Hoefele

Economics Letters, 2019, vol. 177, issue C, 56-59

Abstract: This note investigates how the effect of offshoring on unemployment is influenced by the wage setting process. We assume staggered wage contracts in an otherwise standard search and matching model. In this setup, the contract wage depends also on expected future conditions. We show that more flexibility in the wage contracting process induces greater offshoring, a decrease in the worker’s job-finding probability and higher worker’s wage within job spells. Notably, less stickiness leads to a fall in the rents that firms can extract by producing domestically.

Keywords: Offshoring; Unemployment; Wage stickiness (search for similar items in EconPapers)
JEL-codes: E24 F66 J3 J64 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.econlet.2019.01.025

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