Offshoring and Occupational Specificity of Human Capital

Ritter, Moritz (2009): Offshoring and Occupational Specificity of Human Capital.

Abstract

This paper develops a dynamic general equilibrium model in which workers acquire human capital specific to the task they complete. The dynamic nature of the model allows for differentiation between short and long run effects of offshoring on productivity and labour market outcomes. The welfare effects of increased offshoring are unambiguously positive; their magnitude depends on the difference between autarky and world relative prices, but not on the skill-content of offshored and inshored tasks. For reasonable terms of trade, the steady state welfare gains are found to be between 1.8% and 4% in the calibrated model. The distribution of the gains from trade critically depends on the time horizon: in the short term, workers with human capital specific to the inshored occupations gain, while workers with human capital specific to the offshored occupations lose. In the long run, the gains from trade are equally distributed among ex-ante identical agents.

• Item Type: MPRA Paper
• Language: English
• Keywords: Offshoring; Sectoral Labour Reallocation; Human Capital
• Subjects: F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J62 - Job, Occupational, and Intergenerational Mobility; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity

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