Dynamic Effects of Offshoring

We analyze the effects of offshoring in a multisector-growth-model where the sectors differ by TFP-growth. Our results imply that offshoring influences the long run grwoth rate of the economy along different channels and that the grwoth effects depend on the development of terms of trade and on wether low-productivity-grwoth-activities are offshored. Negative grwoth effects can arise provided that some dependencies exist between countries. Furthermore, offshoring has an impact on structural change. It can slo down or accelerate the structural patterns of the economy that offshores depending on the development of terms of trade....