Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73741
Authors: 
Benz, Sebastian
Year of Publication: 
2012
Series/Report no.: 
Ifo Working Paper 150
Abstract: 
This paper is a dynamic extension of the well-known theory of trade in tasks by Grossman & Rossi-Hansberg (2008). In my model, a firm’s offshoring decision is governed by production cost savings, but also considers potential imitation risk. I show that such a consideration reduces the level of offshoring compared to a static optimization and that adjustment of offshoring volume with respect to changes in offshoring costs or labor endowment is characterized by overshooting and subsequent movement toward a steady state. Moreover, I find that offshoring affects wages via more channels than are apparent in static models. More precisely, I identify a shortrun intertemporal profit effect and a long-run composition effect, both of which depend on the endogenous rate of product imitation. These effects can reverse wellknown static wage effects from offshoring, such as the labor supply effect and productivity effect. The dynamic adjustment predicted by this model has important implications on empirical strategies to identify a meaningful correlation of offshoring and relative wages.
Subjects: 
Offshoring
trade in tasks
skill premium
imitation
JEL: 
F12
F16
F43
J31
O34
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.