Offshoring, Exporting, and Jobs

45 Pages Posted: 21 Jan 2014

See all articles by José Luis Groizard

José Luis Groizard

University of the Balearic Islands

Priya Ranjan

University of California, Irvine - Department of Economics

Antonio Rodriguez-Lopez

University of California, Irvine

Date Written: December 31, 2013

Abstract

We construct a two-sector model -- one producing a homogeneous good and the other producing differentiated goods -- with labor market frictions to study the impact of offshoring on intrafirm, intrasectoral, and intersectoral reallocation of jobs, and on the economy-wide unemployment rate. A reduction in the offshoring cost affects intrafirm and intrasectoral reallocation in the differentiated-good sector through a job-relocation effect, a productivity effect, and a competition effect. The key parameters determining the impact of offshoring on reallocation of jobs at various margins as well as on the economy-wide unemployment rate are the elasticity of substitution between inputs and the elasticity of demand for differentiated goods. Allowing differentiated-good firms to export creates an additional channel through which a reduction in the cost of offshoring affects jobs and unemployment. We also show that the implications of a reduction in the cost of trading final goods are different from those of a reduction in the offshoring cost.

Keywords: heterogeneous firms, offshoring costs, search frictions, unemployment

JEL Classification: F120, F160

Suggested Citation

Groizard, Jose Luis and Ranjan, Priya and Rodriguez-Lopez, Antonio, Offshoring, Exporting, and Jobs (December 31, 2013). CESifo Working Paper Series No. 4550. Available at SSRN: https://ssrn.com/abstract=2382429

Jose Luis Groizard

University of the Balearic Islands ( email )

Department of Economics
Ctra. de Valldemossa km 7.5
Palma de Mallorca, Balears 07122
Spain
+34-971 172 784 (Phone)
+ 34-971 172 389 (Fax)

HOME PAGE: http://www.uib.es/depart/deaweb/personal/profesores/personalpages/jlgroizard/index_eng.htm

Priya Ranjan (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

Antonio Rodriguez-Lopez

University of California, Irvine ( email )

Campus Drive
Irvine, CA 62697-3125
United States

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