Offshoring, Employment, and Aggregate Demand

Posted: 21 Jul 2016

See all articles by Enno Schröder

Enno Schröder

Delft University of Technology - Faculty of Technology, Policy and Management

Date Written: July 20, 2016

Abstract

The article uses a demand-constrained small-open-economy model in the tradition of Keynes and Kalecki to study the effects of offshoring on aggregate demand and domestic employment. Offshoring is represented as labor-saving import-using technical change. The results depend on the behavior of the markup on unit costs. If firms absorb the competitiveness gain through higher markups, the scale effect of labor demand is negative, and offshoring unambiguously reduces domestic demand and employment. If the markup remains constant, the net effect of offshoring on domestic demand and employment is ambiguous; it depends crucially on the price elasticity of exports.

Keywords: Offshoring, Global Value Chains, Trade Flows, Labor Demand, Unemployment, Aggregate Demand, Germany

JEL Classification: F16, F41, J23

Suggested Citation

Schröder, Enno, Offshoring, Employment, and Aggregate Demand (July 20, 2016). Available at SSRN: https://ssrn.com/abstract=2812401 or http://dx.doi.org/10.2139/ssrn.2812401

Enno Schröder (Contact Author)

Delft University of Technology - Faculty of Technology, Policy and Management ( email )

Jaffalaan 5
Delft, 2628BX
Netherlands

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
327
PlumX Metrics