Offshoring: General Equilibrium Effects on Wages, Production and Trade

42 Pages Posted: 27 Mar 2009

See all articles by Richard E. Baldwin

Richard E. Baldwin

University of Geneva - Graduate Institute of International Studies (HEI); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Frederic Robert-Nicoud

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 1, 2008

Abstract

A simple model of offshoring, which depicts offshoring as 'shadow migration,' permits parsimonious derivation of necessary and sufficient conditions for the effects on ages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. The model is extended to allow for two-way offshoring between similar nations and to allow for monopolistic competition. We also show that, unlike trade in goods, trade in tasks typically makes all types of workers better off in both the host and home countries (with some proviso).

Keywords: offshoring, general equilibrium, trade

JEL Classification: F22

Suggested Citation

Baldwin, Richard E. and Robert-Nicoud, Frederic L., Offshoring: General Equilibrium Effects on Wages, Production and Trade (June 1, 2008). Centro Studi Luca d'Agliano Development Studies Working Paper No. 250, Available at SSRN: https://ssrn.com/abstract=1368792 or http://dx.doi.org/10.2139/ssrn.1368792

Richard E. Baldwin (Contact Author)

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

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Geneva, CH-1211
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HOME PAGE: http://www.hei.unige.ch/~baldwin/

Centre for Economic Policy Research (CEPR)

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United Kingdom

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Frederic L. Robert-Nicoud

University of Geneva - Department of Political Economics ( email )

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Geneva 4, CH-1211
Switzerland
+41 22 379 8272 (Phone)
+41 22 379 8293 (Fax)

HOME PAGE: http://www.unige.ch/ses/ecopo/staff/robert/home.html

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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