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Exporting and Offshoring with Monopsonistic Competition

Author

Listed:
  • Hartmut Egger
  • Udo Kreickemeier
  • Christoph Moser
  • Jens Wrona

Abstract

We develop a model of international trade with heterogeneous firms and monopsonistically competitive labour markets. We show that due to monopsonistic competition our model makes sharply different predictions about the effects of the export of goods and the offshoring of tasks. Trade in goods is unambiguously welfare increasing as domestic resources are reallocated to large firms with high productivity and firms with low productivities exit the market thereby reducing the monopsony distortion present in autarky. Offshoring, however, gives firms additional scope for exercising monopsony power by reducing their domestic size and therefore can lead to welfare losses.

Suggested Citation

  • Hartmut Egger & Udo Kreickemeier & Christoph Moser & Jens Wrona, 2022. "Exporting and Offshoring with Monopsonistic Competition," The Economic Journal, Royal Economic Society, vol. 132(644), pages 1449-1488.
    • Handle: RePEc:oup:econjl:v:132:y:2022:i:644:p:1449-1488.
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    File URL: http://hdl.handle.net/10.1093/ej/ueab078
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    Citations

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    Cited by:

    1. Sabien Dobbelaere & Catherine Fuss & Mark Vancauteren, 2022. "Does offshoring shape labor market imperfections? A comparative analysis of Belgian and Dutch firms," Working Paper Research 425, National Bank of Belgium.
    2. Arni, Patrick & Egger, Peter & Erhardt, Katharina & Gubler, Matthias & Sauré, Philip, 2024. "Heterogeneous Impacts of Trade Shocks on Workers," IZA Discussion Papers 16895, Institute of Labor Economics (IZA).
    3. Egger, Hartmut & Kreickemeier, Udo & Moser, Christoph & Wrona, Jens, 2024. "Offshoring and job polarisation between firms," Journal of International Economics, Elsevier, vol. 148(C).
    4. Naumann, Fabrice & Bolz, Simon Johannes & Richter, Philipp Moritz, 2022. "Offshoring and Environmental Policy: Firm Selection and Distributional Effects," VfS Annual Conference 2022 (Basel): Big Data in Economics 264086, Verein für Socialpolitik / German Economic Association.
    5. Kamei, Keita, 2024. "A model of economic integration with ownership structure in general equilibrium oligopoly," Economics Letters, Elsevier, vol. 236(C).
    6. Luca Macedoni, 2022. "Monopsonistic competition, trade, and the profit share," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(2), pages 488-515, April.
    7. Priyaranjan Jha & Antonio Rodriguez-Lopez, 2021. "Minimum Wage and Employer Variety," CESifo Working Paper Series 9312, CESifo.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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