Offshoring medium‐skill tasks, low‐skill unemployment and the skill‐wage structure

Ehssan Vallizadeh, Joan Muysken, Thomas Ziesemer

Research output: Working paperOther research output

Abstract

This paper studies the direct and indirect channels through which offshoring affects the domestic skillwage structure and employment opportunities. To identify these channels, we develop a task-based model with unemployment that accounts for skill heterogeneity and endogenous allocation of domestic tasks to skill groups and abroad. A decline in offshoring costs of medium skill-intensive tasks induces i) a specialization effect towards low and high skill-intensive tasks, explaining one source of wage polarization, ii) an internal skill-task reallocation effect, and iii) a productivity effect due to production cost reductions. The key determinants of these channels are the elasticity of substitution between domestic and offshore tasks and the elasticity of task productivity schedules between domestic skill groups and between domestic and
offshore workers across tasks.
Original languageEnglish
Place of PublicationMaastricht
PublisherUNU-MERIT
Number of pages61
Volume2016-070
Publication statusPublished - 2016

Publication series

SeriesUNU-MERIT Working Papers
Number2016-070
ISSN1871-9872

Cite this

Vallizadeh, E., Muysken, J., & Ziesemer, T. (2016). Offshoring medium‐skill tasks, low‐skill unemployment and the skill‐wage structure. UNU-MERIT. UNU-MERIT Working Papers, No. 2016-070