Offshoring of medium-skill jobs, polarization, and productivity effect

Abstract

"We examine the effects of endogenous offshoring on cost-efficiency, wages and unemployment in a task-assignment model with skill heterogeneity. Exact conditions for the following insights are derived. The distributional effect of offshoring (high-) low-skill-intensive tasks is similar to (unskilled-) skill-biased technology changes, while offshoring medium-skillintensive tasks induces wage polarization. Offshoring improves cost-efficiency through international task reallocation and puts a downward pressure on all wages through domestic skill-task reallocation. If elasticities of task substitution are low (high), the downward pressure on wages in neighboring skill segments is low (high) with a net effect of higher (lower) wages and employment." (Author's abstract, IAB-Doku) ((en))

Cite article

Vallizadeh, E., Muysken, J. & Ziesemer, T. (2015): Offshoring of medium-skill jobs, polarization, and productivity effect. Implications for wages and low-skill unemployment. (IAB-Discussion Paper 07/2015), Nürnberg, 55 p.