Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200976 
Year of Publication: 
2019
Series/Report no.: 
DICE Discussion Paper No. 320
Publisher: 
Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), Düsseldorf
Abstract: 
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.
Subjects: 
Offshoring
Trade in Tasks
Wages
Unemployment
Search and Matching
JEL: 
F11
F16
J64
ISBN: 
978-3-86304-319-3
Document Type: 
Working Paper

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