Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73453
Authors: 
Arnold, Lutz G.
Trepl, Stefanie
Year of Publication: 
2011
Series/Report no.: 
BGPE Discussion Paper 101
Abstract: 
This paper analyzes a North-South trade model with costly offshoring and equilibrium unemployment due to union wage setting. Reductions in the amount of resources required in the offshoring process usually decrease employment, though the opposite can happen at a low initial level of offshoring activity. If additional offshoring leads to a fall in the scale of Northern firms, the increase in Southern workers’ utility comes at the expense of a reduction in each Northern agent’s welfare. The model can be used to make a case for a “pragmatic union leader”: unions have an incentive to take measures that reduce their bargaining power. With firm heterogeneity, there is scope for multiple equilibria.
Subjects: 
offshoring
unemployment
North-South trade
JEL: 
F12
J64
Document Type: 
Working Paper

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