Offshoring of Medium-skill Jobs, Polarization, and Productivity Effect: Implications for Wages and Low-skill Unemployment

Ehsan Vallizadeh, Joan Muysken and Thomas Ziesemer ()

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Abstract: We examine the effects of endogenous offshoring on cost-efficiency, wages and unemployment in a taskassignment model with skill heterogeneity. Exact conditions for the following insights are derived. The distributional effect of offshoring (high-) low-skill-intensive tasks is similar to (unskilled-) skill-biased technology changes, while offshoring medium-skill-intensive tasks induces wage polarization. Offshoring improves cost-efficiency through international task reallocation and puts a downward pressure on all wages through domestic skill-task reallocation. If elasticities of task substitution are low (high), the downward pressure on wages in neighboring skill segments is low (high) with a net effect of higher (lower) wages and employment.

Keywords: Task Assignment; Offshoring; Skills; Cost-efficiency Effect; Equilibrium Unemployment (search for similar items in EconPapers)
JEL-codes: F16 F66 J21 J24 J64 (search for similar items in EconPapers)
Date: 2015-02-04
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Offshoring of medium-skill jobs, polarization, and productivity effect: implications for wages and low-skill unemployment (2015)
Working Paper: Offshoring of Medium-skill Jobs, Polarization, and Productivity Effect: Implications for Wages and Low-skill Unemployment (2015)
Working Paper: Offshoring of medium-skill jobs, polarization, and productivity effect: Implications for wages and low-skill unemployment (2015)
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