Offshoring, migrants and native workers: the optimal choice under asymmetric information

Gianluca Orefice

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: This paper presents a theoretical model about the optimal choice for a firm between offshoring and hiring immigrant workers under asymmetric information about their ability and effort in production (symmetric information is assumed about home born workers). When a domestic firm hires an immigrant it doesn't know his ability; while when the firm goes abroad it uses local agent in order to buy additional information about workers, thus enforceable contracts may be set. We show that it is optimal for firms to produce low quality products offshoring the production abroad, while intermediate quality level products will be produced at home using foreign born workers. Finally, high quality products will be produced using native workers.

Keywords: Immigrants; offshoring; asymmetric information (search for similar items in EconPapers)
JEL-codes: F22 F23 L15 (search for similar items in EconPapers)
Date: 2010-06-16
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Related works:
Journal Article: Offshoring, migrants and native workers: The optimal choice under asymmetric information (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:mil:wpdepa:2010-16

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