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Offshoring, employment, and aggregate demand

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  • Enno Schröder

    (Delft University of Technology)

Abstract

The article uses a demand-constrained small-open-economy model in the tradition of Keynes and Kalecki to study the effects of offshoring on aggregate demand and domestic employment. Offshoring is represented as labor-saving import-using technical change. The results depend on the behavior of the markup on unit costs. If higher markups absorb the competitiveness gain, the scale effect of labor demand is negative, and offshoring unambiguously reduces domestic demand and employment. If the markup remains constant, the net effect of offshoring on domestic demand and employment is ambiguous; it depends crucially on the price elasticity of exports.

Suggested Citation

  • Enno Schröder, 2020. "Offshoring, employment, and aggregate demand," Journal of Evolutionary Economics, Springer, vol. 30(1), pages 179-204, January.
    • Handle: RePEc:spr:joevec:v:30:y:2020:i:1:d:10.1007_s00191-018-0582-4
    DOI: 10.1007/s00191-018-0582-4
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    More about this item

    Keywords

    Offshoring; Global value chains; Trade flows; Labor demand; Unemployment; Aggregate demand; Germany;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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