Offshoring, Exporting, and Jobs

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

No 4550, CESifo Working Paper Series from CESifo

Abstract: We construct a two-sector model - one producing a homogeneous good and the other producing differentiated goods - with labor market frictions to study the impact of offshoring on intrafirm, intrasectoral, and intersectoral reallocation of jobs, and on the economy-wide unemployment rate. A reduction in the offshoring cost affects intrafirm and intrasectoral reallocation in the differentiated-good sector through a job-relocation effect, a productivity effect, and a competition effect. The key parameters determining the impact of offshoring on reallocation of jobs at various margins as well as on the economy-wide unemployment rate are the elasticity of substitution between inputs and the elasticity of demand for differentiated goods. Allowing differentiated-good firms to export creates an additional channel through which a reduction in the cost of offshoring affects jobs and unemployment. We also show that the implications of a reduction in the cost of trading final goods are different from those of a reduction in the offshoring cost.

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: 2013
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Working Paper: Offshoring, Exporting, and Jobs (2013)
Working Paper: Offshoring, Exporting, and Jobs (2013)
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