Offshoring, employment, and aggregate demand

Enno Schröder

Journal of Evolutionary Economics, 2020, vol. 30, issue 1, No 8, 179-204

Abstract: Abstract The article uses a demand-constrained small-open-economy model in the tradition of Keynes and Kalecki to study the effects of offshoring on aggregate demand and domestic employment. Offshoring is represented as labor-saving import-using technical change. The results depend on the behavior of the markup on unit costs. If higher markups absorb the competitiveness gain, the scale effect of labor demand is negative, and offshoring unambiguously reduces domestic demand and employment. If the markup remains constant, the net effect of offshoring on domestic demand and employment is ambiguous; it depends crucially on the price elasticity of exports.

Keywords: Offshoring; Global value chains; Trade flows; Labor demand; Unemployment; Aggregate demand; Germany (search for similar items in EconPapers)
JEL-codes: F16 F41 J23 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00191-018-0582-4

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