Offshoring and directed technical change

Daron Acemoglu, Gino Gancia and Fabrizio Zilibotti

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We study the short- and long-run implications of offshoring on innovation, technology adoption, wage and income inequality in a Ricardian model with directed technical change. In our model, profit maximization determines both the extent of offshoring and the direction of technological progress. A fall in the cost of offshoring induces technical change with an ambiguous factor bias. When the initial offshoring cost is high, an increase in offshoring opportunities triggers a transition with falling real wages for unskilled workers in the West, skill-biased technical change and rising skill premia worldwide. When the offshoring cost is sufficiently low, instead, further increases in offshoring opportunities induce technical change biased in favor of the unskilled workers and may lower the skill premium. Although offshoring improves the welfare of workers in the East, it may benefit or harm unskilled workers in the West depending on parameters, the level of offshoring and the equilibrium growth rate.

Keywords: China; Directed Technical Change; Offshoring; Productivity growth; Skill Premium. (search for similar items in EconPapers)
JEL-codes: F43 O31 O33 (search for similar items in EconPapers)
Date: 2012-11, Revised 2014-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Offshoring and Directed Technical Change (2015)
Working Paper: Offshoring and Directed Technical Change (2014)
Working Paper: Offshoring and Directed Technical Change (2012)
Working Paper: Offshoring and Directed Technical Change (2012)
Working Paper: Offshoring and Directed Technical Change (2012)
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