Offshoring Production: A Simple Model of Wages, Productivity, and Growth

Colin Davies () and Alireza Naghavi
Authors registered in the RePEc Author Service: Colin Robert Davis

Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"

Abstract: We examine the relationship between o¤shoring and the labour market in an occupational choice model of trade and endogenous growth where workers are employed on the basis of their individual skill levels. Trade liberalization leads to o¤shoring and reduces employment in the manufacturing sector. Displaced workers move into the traditional and innovation sectors ac- cording to their skill levels, shaping real wages and aggregate productivity in the manufacturing sector. The paper aims to show how inter-sectoral labour market adjustments, highlighted by skill heterogeneity, could be a possible explanation for the simultaneous rise in productivity and reduction in real wages that have coincided with the sharp escalation of o¤shoring activities in the US manufacturing sector since 2004.

Keywords: o¤shoring; trade liberalization; real wages; growth; productivity; inter-sectoral labour reallocation; skill heterogeneity. (search for similar items in EconPapers)
JEL-codes: F16 F23 J24 (search for similar items in EconPapers)
Pages: pages 27
Date: 2008-11
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (1)

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Journal Article: OFFSHORING PRODUCTION: A SIMPLE MODEL OF WAGES, PRODUCTIVITY, AND GROWTH (2011)
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