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Offshoring of Medium-skill Jobs, Polarization, and Productivity Effect: Implications for Wages and Low-skill Unemployment

Author

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  • Vallizadeh, Ehsan
  • Muysken, Joan
  • Ziesemer, Thomas
Abstract
We examine the effects of endogenous offshoring on cost-efficiency, wages and unemployment in a taskassignment model with skill heterogeneity. Exact conditions for the following insights are derived. The distributional effect of offshoring (high-) low-skill-intensive tasks is similar to (unskilled-) skill-biased technology changes, while offshoring medium-skill-intensive tasks induces wage polarization. Offshoring improves cost-efficiency through international task reallocation and puts a downward pressure on all wages through domestic skill-task reallocation. If elasticities of task substitution are low (high), the downward pressure on wages in neighboring skill segments is low (high) with a net effect of higher (lower) wages and employment.

Suggested Citation

  • Vallizadeh, Ehsan & Muysken, Joan & Ziesemer, Thomas, 2015. "Offshoring of Medium-skill Jobs, Polarization, and Productivity Effect: Implications for Wages and Low-skill Unemployment," EconStor Preprints 107080, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:107080
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    More about this item

    Keywords

    Task Assignment; Offshoring; Skills; Cost-efficiency Effect; Equilibrium Unemployment;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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