Offshoring medium-skill tasks, low-skill unemployment and the skill-wage structure

Ehsan Vallizadeh, Joan Muysken () and Thomas Ziesemer ()
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Joan Muysken: UNU-MERIT, CofFEE-Europe and SBE, Maastricht University

No 2016-070, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: This paper studies the direct and indirect channels through which offshoring affects the domestic skillwage structure and employment opportunities. To identify these channels, we develop a task-based model with unemployment that accounts for skill heterogeneity and endogenous allocation of domestic tasks to skill groups and abroad. A decline in offshoring costs of medium skill-intensive tasks induces i) a specialization effect towards low and high skill-intensive tasks, explaining one source of wage polarization, ii) an internal skill-task reallocation effect, and iii) a productivity effect due to production cost reductions. The key determinants of these channels are the elasticity of substitution between domestic and offshore tasks and the elasticity of task productivity schedules between domestic skill groups and between domestic and offshore workers across tasks.

Keywords: Skill-Task Assignment; Offshoring; Productivity Effect; Equilibrium Unemployment; Skill-Wage Structure (search for similar items in EconPapers)
JEL-codes: F16 F66 J21 J24 J64 (search for similar items in EconPapers)
Date: 2016-12-14
New Economics Papers: this item is included in nep-lma
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Working Paper: Offshoring Medium-Skill Tasks, Low-Skill Unemployment and the Skill-Wage Structure (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2016070

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