University of California - Irvine
Department of Economics
3151 Social Science Plaza A
Irvine, CA 92697-5100
Institutional Affiliation: University of California at Irvine
Information about this author at RePEc
NBER Working Papers and Publications
|June 2007||Offshoring and Unemployment|
with Devashish Mitra: w13149
In this paper, in order to study the impact of offshoring on sectoral and economywide rates of unemployment, we construct a two sector general equilibrium model in which labor is mobile across the two sectors, and unemployment is caused by search frictions. We find that, contrary to general perception, wage increases and sectoral unemployment decreases due to offshoring. This result can be understood to arise from the productivity enhancing (cost reducing) effect of offshoring. If the search cost is identical in the two sectors, or even if the search cost is higher in the sector which experiences offshoring, the economywide rate of unemployment decreases. We also find multiple equilibrium outcomes in the extent of offshoring and therefore, in the unemployment rate. Furthermore, a firm can ...
Published: “Offshoring and Unemployment: The Role of Search Frictions and Labor Mobility,” (with Priya Ranjan) Journal of International Economics 81(2), July 2010, 219-229
|October 2005||Y2K and Offshoring: The Role of External Economies and Firm Heterogeneity|
with Devashish Mitra: w11718
We construct a model of offshoring with externalities and firm heterogeneity. Due to the presence of externalities, temporary shocks like the Y2K problem can have permanent effects, i.e., they can permanently raise the extent of offshoring in an industry. Also, the initial advantage of a country as a potential host for outsourcing activities can create a lock in effect, whereby late movers have a comparative disadvantage. Furthermore, the existence of firm heterogeneity along with externalities can help explain the dynamic process of offshoring, where the most productive firms offshore first and the others follow later. Finally, we show the possibility of complementarity between two modes of offshoring: FDI and offshore outsourcing.