Outsourcing Peter to Pay Paul: High-Skill Expectations and Low-Skill Wages With Imperfect Labor Markets

Davidson, Carl; Matusz, Steven J.; Shevchenko, Andrei

doi:10.1017/s1365100508070247

“…In autarky, we can explicitly compute the Theil indices for the income distribution of selfemployed agents and production workers, respectively: 44) and In view of ∆ 1 T (0) = 0, this implies that ∆ 1 T (â) > 0 holds for allâ ∈ (0, 1). While the sign of ∆ 2 T (θ;â) is not clear in general, it is immediate that ∆ T (θ;â) > 0 holds for sufficiently small levels of θ.…”

Section: Economy-wide Income Distributionmentioning

confidence: 99%

“…This is a key difference to the superstar effect present in our model. Davidson, Matusz, and Shevchenko (2008) consider high-skill offshoring in a model with search frictions, in which firms can choose whether to produce with an advanced technology or a traditional technology, and workers are either high-skill or low-skill. Their framework is very different from ours, in that all firms hire only a single worker, and in an offshoring equilibrium they have to decide whether to do so domestically or abroad.…”

Section: Introductionmentioning

confidence: 99%

Offshoring domestic jobs

Egger

¹

,

Kreickemeier

²

,

Wrona

³

2015

Journal of International Economics

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe set up a two-country general equilibrium model, in which heterogeneous firms from one country (the source country) can offshore routine tasks to a low-wage host country. The most productive firms self-select into offshoring, and the impact on welfare in the source country can be positive or negative, depending on the share of firms engaged in offshoring. Each firm is run by an entrepreneur, and inequality between entrepreneurs and workers as well as intra-group inequality among entrepreneurs is higher with offshoring than in autarky.All results hold in a model extension with firm-level rent sharing, which results in aggregate unemployment. In this extended model, offshoring furthermore has non-monotonic effects on unemployment and intra-group inequality among workers. The paper also offers a calibration exercise to quantify the effects of offshoring.JEL-Classification: F12, F16, F23

show abstract

“…from a still high 26%. To come to grips with this reversion of the Spanish economy we make use of the equilibrium and welfare analysis as discussed in Albrecht and Vroman (2002) and Davidson et al (2008). Albrecht and Vroman (2002) present a matching model with endogenous skill requirements where employers create both high and low-skill vacancies, and where it is also assumed that a low-skill job can be done by either type of worker yet high-skill jobs can only be …lled by high-skill workers.…”

Section: Introductionmentioning

confidence: 99%

Bubble economics and structural change: the cases of Spain and France compared

Agnese¹,

Hromcová

²

2016

Journal of Economic Policy Reform

2

1

0

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. This paper delves into the recent events that led to the formation of the housing bubble in Spain and the resulting structural change that is arguably needed to put the economy back into the right track. For this purpose we calibrate a model with different equilibria descriptive of the labor markets in Spain and France, where the unemployment rates went from the same initial spot to very different levels. In addition to this, we run two counterfactual analyses that throw some more light on the performance of the Spanish labor market and the Spanish housing bubble. Our results suggest that the unemployment rate in Spain has jumped to much higher levels while switching between equilibria or, what is the same, because of structural change. Moreover, our counterfactuals indicate that, first, the Spanish flexibilization reform has fallen short of its own goals and, second, there has been an important misdirection of resources into the construction industry mainly fueled by excessively low real interest rates.JEL Classification: J64, O57

show abstract

“…Whether labor market reforms induce spillover effects on foreign labor market outcomes depends on the assumptions about the degree of capital mobility and the households' income situation. Mitra and Ranjan (2010) and Davidson, Matusz, and Shevchenko (2008) study the effects of outsourcing on labor market outcomes in trade models with search frictions. Mitra and Ranjan (2010) have a two sector model with labor being the only input factor.…”

Section: Introductionmentioning

confidence: 99%

“…In their model, outsourcing decreases equilibrium unemployment. Conversely, Davidson et al (2008) propose a model where outsourcing forces some of the high-skill workers in the North to search for jobs in the low-skill intermediate sector. This stirs up job competition in that sector and thus triggers a rise in unemployment.…”

Section: Introductionmentioning

confidence: 99%

Skill-Biased Labor Market Reforms and International Competitiveness

Schmerer

¹

2012

Economics

1

0

View full text Add to dashboard Cite

This paper proposes a multi-industry trade model with integrated capital and goods markets. Labor market imperfections in line with Mortensen and Pissarides (Job Creation and Job Destruction in the Theory of Unemployment, 1994) give rise to unemployment and a channel for the government to influence markets through institutional changes. Labor market interventions feedback into the product market through changes in a country's competitiveness. Moreover, the distinction between high-and low-skill workers facilitates the analysis of skillbiased institutional changes that have stronger impact on certain skill groups. The comparative static exercise in this paper shows that high-skilled benefit from low-skill biased labor market reforms through higher wages. Lower labor costs reduce unemployment of the low-skilled and increases the reforming country's competitiveness. One-sided labor market interventions have feedback effects through adjustments at the extensive margin, which affect all workers at home and abroad irrespective of their level of skill. Governments in the non-reforming countries may react to this loss in competitiveness by initiating cooperative labor market reforms instead. Special IssueResponding to the Labour Market Challenges of Globalisation JEL F16, E24, J6

show abstract

Outsourcing Peter to Pay Paul: High-Skill Expectations and Low-Skill Wages With Imperfect Labor Markets

Cited by 46 publications

References 12 publications

Offshoring domestic jobs

Offshoring domestic jobs

Bubble economics and structural change: the cases of Spain and France compared

Skill-Biased Labor Market Reforms and International Competitiveness

Contact Info

Product

Resources

About