1 option
Offshoring and Directed Technical Change / Daron Acemoglu, Gino Gancia, Fabrizio Zilibotti.
- Format:
- Book
- Author/Creator:
- Acemoglu, Daron.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w18595.
- NBER working paper series no. w18595
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2012.
- Summary:
- To study the short-run and long-run implications on wage inequality, we introduce directed technical change into a Ricardian model of offshoring. A unique final good is produced by combining a skilled and an unskilled product, each produced from a continuum of intermediates (tasks). Some of these tasks can be transferred from a skill-abundant West to a skill-scarce East. Profit maximization determines both the extent of offshoring and technological progress. Offshoring induces skill-biased technical change because it increases the relative price of skill intensive products and induces technical change favoring unskilled workers because it expands the market size for technologies complementing unskilled labor. In the empirically more relevant case, starting from low levels, an increase in offshoring opportunities triggers a transition with falling real wages for unskilled workers in the West, skill-biased technical change and rising skill premia worldwide. However, when the extent of offshoring becomes sufficiently large, further increases in offshoring induce technical change now biased in favor of unskilled labor because offshoring closes the gap between unskilled wages in the West and the East, thus limiting the power of the price effect fueling skill-biased technical change. The unequalizing impact of offshoring is thus greatest at the beginning. Transitional dynamics reveal that offshoring and technical change are substitutes in the short run but complements in the long run. Finally, though offshoring improves the welfare of workers in the East, it may benefit or harm unskilled workers in the West depending on elasticities and the equilibrium growth rate.
- Notes:
- Print version record
- December 2012.
The Penn Libraries is committed to describing library materials using current, accurate, and responsible language. If you discover outdated or inaccurate language, please fill out this feedback form to report it and suggest alternative language.