Offshoring, Matching, and Income Inequality

57 Pages Posted: 27 Apr 2022

See all articles by Jaerim Choi

Jaerim Choi

University of Hawaii at Manoa - Department of Economics

Abstract

This paper develops a matching framework of offshoring in which offshoring is defined as cross-country matching between workers and managers with complementary production technology. We study the distributional effects of offshoring by embedding the matching framework in a two-country, two-task model in which workers and managers possess a continuum of skills. Offshoring alters the matching mechanism, changes the span of control, and thereby influences inequality through differential distributional impacts between-task and within-task in each country. We then introduce an endogenous task choice into the model and show that offshoring changes the occupational choice mechanism, which feeds through into distributional consequences. In one case with an endogenous task choice, when all workers match with better managers through offshoring, offshoring increases within-worker inequality in both countries. This outcome provides new insight into the distributional consequences of offshoring.

Keywords: Offshoring, Matching, Span of Control, Inequality

Suggested Citation

Choi, Jaerim, Offshoring, Matching, and Income Inequality. Available at SSRN: https://ssrn.com/abstract=4095087 or http://dx.doi.org/10.2139/ssrn.4095087

Jaerim Choi (Contact Author)

University of Hawaii at Manoa - Department of Economics ( email )

Honolulu, HI
United States

HOME PAGE: http://www.jaerimchoi.com/

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