Offshoring: General Equilibrium Effects on Wages, Production and Trade

Richard Baldwin · Frédéric Robert‐Nicoud

50 citations0/0 files storedNational Bureau of Economic Research

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Global trade and economics Migration and Labor Dynamics Global Trade and Competitiveness

Abstract

A simple model of offshoring, which depicts offshoring as 'shadow migration,' permits straightforward derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade.We show that offshoring requires modification of the four classic international trade theorems, so econometricians who ignore offshoring might reject the Heckscher-Ohlin theorem when a properly specified version held in the data.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.

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References

2002Technology, Geography, and Trade 2001The nature and growth of vertical specialization in world trade 1986Market Structure and Foreign Trade 2001The Skill Content of Recent Technological Change: An Empirical Exploration 1941Protection and Real Wages 2008Trading Tasks: A Simple Theory of Offshoring 1984A Simple Theory of International Trade with Multinational Corporations 2014National and International Returns to Scale in the Modern Theory of International Trade

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