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Trade in tasks: Revisiting the wage and employment effects of offshoring
Author(s) -
Kohler Wilhelm,
Wrona Jens
Publication year - 2021
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12507
Subject(s) - offshoring , matching (statistics) , labour economics , unemployment , economics , wage , displacement (psychology) , business , outsourcing , macroeconomics , psychology , statistics , mathematics , marketing , psychotherapist
We examine conditions under which offshoring of labour tasks raises domestic wages and employment. Existing literature emphasizes that absorption of job displacement through intersectoral reallocation of factors is a key requirement for this outcome, mostly assuming full employment. We develop a model featuring a less benign environment that rules out such reallocation and allows for equilibrium unemployment due to costly search and matching. Assuming offshoring of both high‐skilled and low‐skilled labour tasks, we derive conditions under which offshoring benefits all workers in terms of both, wages and employment.