Low-Skill Offshoring and Welfare Compensation Policies

Jana Hromcová and Pablo Agnese

Working Papers from Department of Applied Economics at Universitat Autonoma of Barcelona

Abstract: We analyze the effects of low-skill offshoring on welfare. In the context of a matching model with different possible equilibria, we discuss two alternative policies that could potentially outweigh the negative welfare effects of offshoring, namely, a change of the unemployment benefits and the flexibilization of the labor market. Our calibrations for the German economy suggest that the flexibilization of the labor market can bring low-skill workers to pre-offshoring welfare levels by slightly reducing the vacancy costs, something that cannot be accomplished by meddling with the unemployment benefits scheme. In addition, we find that a full compensation can be achieved by an upgrading of low-skill workers, its size depending on the type of equilibrium involved. In sum, our analysis gives support to flexibilization and upgrading by education as best therapies for offshoring.

Keywords: Offshoring; Welfare; Unemployment benefits; Labor Market Flexibility; Upgrading. (search for similar items in EconPapers)
JEL-codes: F66 J68 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2015-06
New Economics Papers: this item is included in nep-dge and nep-lab
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Journal Article: Low-skill offshoring and welfare compensation policies (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:uab:wprdea:wpdea1505

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