Offshoring Tasks, Yet Creating Jobs?

35 Pages Posted: 26 Apr 2010

See all articles by Wilhelm Kohler

Wilhelm Kohler

University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Jens Wrona

University of Tuebingen - Faculty of Economics and Social Sciences

Date Written: April 2010

Abstract

We show that in a Ricardo-Viner-type trade model with unemployment due to search and matching the productivity effect of offshoring emphasized by Grossman & Rossi-Hansberg (2008) emerges as a vehicle of job creation. Improvements in the technology of offshoring causes job losses at the extensive margin where ever more tasks are performed abroad, but it also causes job creation from cost-savings associated with enhanced trade in tasks. We identify conditions under which job creation dominates job destruction. We also show that employment may follow a non-monotonic pattern of adjustment to successive improvements in the technology of offshoring.

Keywords: offshoring, trade in tasks, unemployment, search and matching

JEL Classification: F16

Suggested Citation

Kohler, Wilhelm K. and Wrona, Jens, Offshoring Tasks, Yet Creating Jobs? (April 2010). CESifo Working Paper Series No. 3019, Available at SSRN: https://ssrn.com/abstract=1595898 or http://dx.doi.org/10.2139/ssrn.1595898

Wilhelm K. Kohler (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Jens Wrona

University of Tuebingen - Faculty of Economics and Social Sciences ( email )

Mohlstrasse 36
Tuebingen, Baden-Wuerttemberg 72074
Germany

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