Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10477040 | Journal of International Economics | 2015 | 14 Pages |
Abstract
We develop a two-country general equilibrium model, in which heterogeneous firms offshore routine tasks to a low-wage host country. In the presence of fixed costs for offshoring the most productive firms self-select into offshoring, which leads to a reallocation of domestic labor towards less productive uses if offshoring costs are high. As a consequence domestic welfare may fall. The reallocation effect is reversed and domestic welfare rises if offshoring costs are low. The aggregate income distribution, comprising wages and entrepreneurial incomes, becomes more unequal with offshoring.
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Economics and Econometrics
Authors
Hartmut Egger, Udo Kreickemeier, Jens Wrona,