Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/194226
Authors: 
Chen, Xi
Year of Publication: 
2018
Series/Report no.: 
FIW Working Paper No. 191
Abstract: 
The received wisdom is that cheaper foreign inputs may replace tasks previously done by domestic labor, and cause displacement of workers at the home country. However, using the U.S. multinational enterprises data, the empirical evidence in this paper does not support the idea that the imported intermediate input from foreign affiliates necessarily substitutes the domestic labor force at the sector-level. In order to better elucidate the offshoring employment relationship, this paper develops a general equilibrium model with monopolistic competition and firm heterogeneity. The model features (i) a fair wage condition where firms pay a real wage that exceeds the market clearing level and varies with productivity; (ii) an open economy in which firms can move a part of their production process to foreign countries. This model allows us to examine how a production-side shock that changes firms' offshoring decision can influence the local economy and its labor market.
Subjects: 
heterogeneous firms
productivity
offshoring
fair wage
employment
JEL: 
D21
D24
F12
F16
F66
Document Type: 
Working Paper

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