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Offshoring and Skill-Biased Technical Change in the Context of US Protectionism

Author

Listed:
  • Agnese, Pablo

    (UIC Barcelona)

  • Hromcová, Jana

    (ESSCA School of Management)

Abstract

We discuss the effects of offshoring on the labor market in a matching model with endogenous adjustment of educational skills. We carry out a comparative statics analysis and show that offshoring leads to a restructuring of the economy through skill-biased technical change (SBTC) where overall welfare is improved. In a policy exercise we show that, if offshoring were to be opposed by a protectionist agenda, labor market flexibility can bring about the same welfare gain. In addition, we offer an empirical analysis aimed at verifying the correlation be- tween offshoring and SBTC in US manufacturing industries in recent years. Our results show that different offshoring strategies affect SBTC differently. In particular, the evidence suggests that while high-skill offshoring strategies open the skill gap, low-skill offshoring strategies tend to work in the opposite direction.

Suggested Citation

  • Agnese, Pablo & Hromcová, Jana, 2019. "Offshoring and Skill-Biased Technical Change in the Context of US Protectionism," IZA Discussion Papers 12593, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12593
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    References listed on IDEAS

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    More about this item

    Keywords

    skill-biased technical change; skills; offshoring;
    All these keywords.

    JEL classification:

    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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