Offshoring and Migration in a World with Policy Spillovers

42 Pages Posted: 22 Oct 2011

See all articles by Cosimo Beverelli

Cosimo Beverelli

World Trade Organization (WTO); European University Institute

Gianluca Orefice

World Trade Organization (WTO)

Nadia Rocha

World Trade Organization

Date Written: October 1, 2011

Abstract

Using a trade in task model that extends the one of Ottaviano, Peri, and Wright (2010) to three countries, we study the effects of immigration and offshoring costs on employment. Tasks can be performed by migrants, offshore workers or natives, with sorting along a continuum of task determined by cost minimization. For two alternative specifications of the model - one in which the ordering of low-end and intermediate tasks is pinned down by worker characteristic and one in which it is pinned down by country characteristics - we derive testable predictions on ‘direct,’ ‘domestic spillover’ and ‘international spillover’ effects of migration and offshoring costs on the number of migrants and the number of offshore workers. Direct effects refer to the impact of own migration (offshoring) costs on number of migrant (offshore) workers. Domestic spillovers capture the effect of own migration (offshoring) costs on the number of offshore (migrant) workers. International spillovers refer to the direct effect of country j’s migration (offshoring) costs on country i’s migration (offshoring), and to the indirect effect of country j’s migration (offshoring) costs on country i’s offshoring (migration). Overall, we find strong support of negative direct effects, mild support for domestic spillover effects and very limited support for international spillover effect, leading to conclude that the second model specification is a better fit of the data. Two broad policy implications follow. First, host countries can affect the number of migrants by acting both on bilateral migration policies and on bilateral offshoring policies. Second, de jure discriminatory policies on migration or offshoring need not be de facto so.

Keywords: Trade in tasks, employment, spillover effects

JEL Classification: F22, F23, J24, J61

Suggested Citation

Beverelli, Cosimo and Orefice, Gianluca and Rocha, Nadia, Offshoring and Migration in a World with Policy Spillovers (October 1, 2011). Available at SSRN: https://ssrn.com/abstract=1946979 or http://dx.doi.org/10.2139/ssrn.1946979

Cosimo Beverelli (Contact Author)

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva, 1202
Switzerland

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Gianluca Orefice

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva 21, CH-1211
Switzerland

Nadia Rocha

World Trade Organization ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

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