Offshoring: general equilibrium effects on wages, production and trade

Richard Baldwin and Frederic Robert-Nicoud

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: A simple model of offshoring is used to integrate the complex gallery of results that exist in the theoretical offshoring/fragmentation literature. The paper depicts offshoring as ‘shadow migration’ and shows that this allows straightforward derivation of the general equilibrium effects on prices, wages, production and trade (necessary and sufficient conditions are provided). We show that offshoring requires modification of the four HO theorems, so econometricians who ignore offshoring might reject the HO 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.

Keywords: Offshoring; Shadow migration; Inter-industry trade; Intra-industry trade; Trade theorems (search for similar items in EconPapers)
JEL-codes: F02 F12 L22 R11 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2007-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

Downloads: (external link)
http://eprints.lse.ac.uk/19720/ Open access version. (application/pdf)

Related works:
Working Paper: Offshoring: General Equilibrium Effects on Wages, Production and Trade (2008)
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 (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:19720

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