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OFFSHORING OF SERVICE JOBS

Demiroglu, Ufuk (2006): OFFSHORING OF SERVICE JOBS.

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Abstract

Recent technological advances have made it economical to import some services that were not so previously, raising concerns about the future of U.S. jobs and workers' incomes. However, the current extent of service offshoring is very modest, both as a share of GDP and in terms of its contribution to aggregate labor market turnover and worker displacements. Service offshoring is still only a minor part of the international economic competition that the U.S. faces. Service offshoring appears to have been relatively intense for IT occupations, but the employment and wage trends in those occupations still compare favorably to U.S. averages. While offshoring might become much more significant in the future, a closer look at detailed occupations reveals that most U.S. service jobs currently are not suitable for performing remotely from abroad, even when some significant cultural and institutional barriers are ignored. In addition, a range of transaction and adjustment costs slow offshoring growth, and it would take a long time for offshoring to attain its potential limits, possibly decades. However, current estimates regarding how fast and how far offshoring will grow are very uncertain.

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