Trade in tasks: Revisiting the wage and employment effects of offshoring
Wilhelm Kohler and
No 320, DICE Discussion Papers from University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
We revisit Grossman and Rossi-Hansberg's (2008) famous result, that under certain conditions offshoring of low-skilled labor tasks raises the domestic wage for low-skilled workers. Our re-examination features a less benign environment where Rybczynski-type reallocation of factors to absorb offshoring-induced job displacement is ruled out. We allow for simultaneous offshoring of both skilled and unskilled labor, and we derive new results on the role of factor-bias in offshoring, identifying conditions under which offshoring has a "lifiting-all-boats" effect benefitting all workers. Extending our analysis to a frictional labor market with equilibrium unemployment due to costly matching, we demonstrate that under these same conditions offshoring is also associated with rising employment.
Keywords: Offshoring; Trade in Tasks; Wages; Unemployment; Search and Matching (search for similar items in EconPapers)
JEL-codes: F11 F16 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:320
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