Offshoring, Welfare, and Flexibility in the Context of US Protectionism

Pablo Agnese and Jana Hromcová

International Economic Journal, 2021, vol. 35, issue 4, 391-410

Abstract: We reexamine the effects of offshoring in the US economy in the aftermath of the 2008 crisis. We use a matching model with endogenous adjustment of educational skills while distinguishing between offshoring of high and low-skill activities. We first show that offshoring leads to a restructuring of the economy through a change in the wage premium where overall welfare is improved. Moreover, in a policy exercise, we show that, if offshoring were to be opposed by a protectionist agenda, the resulting welfare losses could be counterbalanced by increased labor flexibility.

Date: 2021
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DOI: 10.1080/10168737.2021.1971281

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