Offshoring of medium-skill jobs, polarization, and productivity effect : implications for wages and low-skill unemployment

Ehsan Vallizadeh; Joan Muysken; Thomas Ziesemer

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.

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Year of publication:	2015
Authors:	Vallizadeh, Ehsan ; Muysken, Joan ; Ziesemer, Thomas
Publisher:	Nürnberg : Institut für Arbeitsmarkt- und Berufsforschung
Subject:	Task Assignment \| Offshoring \| Skills \| Cost-efficiency Effect \| Equilibrium Unemployment \| Qualifikation \| Occupational qualification \| Auslandsverlagerung \| Arbeitslosigkeit \| Unemployment \| Beschäftigungseffekt \| Employment effect \| Lohnstruktur \| Wage structure \| Ungelernte Arbeitskräfte \| Unskilled workers \| Produktivität \| Productivity \| Arbeitsproduktivität \| Labour productivity \| Lohn \| Wages \| Technischer Fortschritt \| Technological change