Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI

Trade theory consists of a portfolio of models. What elements might be useful in modeling the offshoring of white-collar services, or do these issues call for an entirely fresh approach? I try to identifying some of the important aspects of this phenomenon and then argue that modeling could focus on (a) vertical fragmentation of production, (b) expansion of trade at the extensive margin, (c) fragments that differ in factor intensities and countries that differ in endowments, and (d) knowledge or capital stocks of countries or firms that are complementary to skilled labor, and create missing inputs for countries otherwise well suited to skill-intensive fragments. I argue that we can make good progress by selecting a number of "modules" from existing theory. I use these to formulate a series of simple "template" models which capture many of the characteristics of offshoring, and then use those models to identify the effects of technological or institutional changes which allow offshoring of white-collar services to occur.

Towards a common migration policy : potential impact on the EU economy

"There is no simple answer to the question of the potential impact of migration on the EU economy. EU migration policy is expected to meet the requirements of economic and social policy, in particular of the Lisbon Agenda, as well as national cultural, political, strategic and security imperatives. The problem is complicated by different national traditions in social organisation, which are deeply rooted in history and which have resulted in different migration models within the EU. Moreover, what is an issue in its own right is immigration as a tool to counter the negative impact of population ageing on economic growth and the pressure on public funds. Another aspect of migration concerns the internationalisation of production and its contribution to the diversification of the productive structure of the EU and its member states. Further, migration may also contribute to the growth of the informal economy, an aspect of concern in member states with large shares of the informal sector in GDP. Yet another question to be resolved is the role of migration in the flow of trade in goods and services within an enlarged Europe and between the EU (25) and the rest of the world. The distinction between migration and trade in services (mode 4) is important for judging the impact on the labour market, as the regulatory mechanisms differ. The paper addresses all the above issues. As with employment, education and social policies, a common understanding about the impact of various possible routes of migration policies on the societies of the member states has to be obtained before entering a process of policy coordination towards eventual convergence. The paper focuses on ways in which different policies on various categories of migration - labour migration, family reunification, refugee and asylum-seeker intake - and the free movement of service providers can differentially impact the EU economy, calling for a complex mix of policy interventions to address the various socio-economic challenges emanating from them." (Author's abstract, IAB-Doku) ((en))Wanderungspolitik, Einwanderungspolitik, europäische Integration, Wirtschaftsentwicklung, Wirtschaftspolitik, Sozialpolitik, demografischer Wandel, Altersstruktur, Bevölkerungsstruktur, Produktion - Internationalisierung, EU-Binnenmarkt, Gütermarkt, Liberalisierung, Außenhandel, Dienstleistungen, Schattenwirtschaft, Arbeitsmigration, Familiennachzug, Asylpolitik, Flüchtlinge, EU-Osterweiterung, Arbeitsmarkt, Integrationspolitik, Europäische Union

Home country effects of offshoring. A critical survey on empirical literature.

The International fragmentation of production processes is of rising importance. One part of this fragmentation involves the relocation of a production process from a home- to a new host country. This literature survey deals with the effects of such relocations on the home country. First of all, we try to conceptualize the terms and definitions most frequently used in this context which are "outsourcing", "offshore outsourcing" and "offshoring". Despite the fact that there is little textual documentation dealing directly with the phenomena of offshoring and offshore outsourcing we try to give an overview of possible empirical literature to which one can regard to. Including FDI literature we try to cover empirical literature which can provide helpful insight on the effects of a relocation to foreign countries on the home country in connection with wages, skill upgrading, prices, profits, taxes and unions. (author's abstract)Series: Discussion Papers SFB International Tax Coordinatio

Product service systems in the automotive industry: An alternative business model for a sustainable satisfaction system

Copyright @ 2008 Brunel UniversityThe paper presents the intermediate results of an on-going research project called Vehicle Design Summit (VDS), run by an international Consortium of Universities coordinated by the MIT of Boston. The project aims at designing and prototyping an eco-efficient vehicle as well as defining an innovative and sustainable business model to introduce and diffuse it into the mobility sector. In this framework the paper explores the potential contribution that PSSs can have in moving beyond incremental technological improvements towards system innovation in the automotive industry. This is outlined presenting and discussing an alternative business model, characterized by: an approach to mobility as the scope of design; an innovative stakeholders network; a shift from selling products to selling results; a change in product ownership; and a consequent change in vehicle design

Offshoring and Unemployment: The Role of Search Frictions and Labor Mobility

In a two-sector, general-equilibrium model with labor-market search frictions, we find that wage increases and sectoral unemployment decreases upon offshoring in the presence of perfect intersectoral labor mobility. If, as a result, labor moves to the sector with the lower (or equal) vacancy costs, there is an unambiguous decrease in economywide unemployment. With imperfect intersectoral labor mobility, unemployment in the offshoring sector can rise, with an unambiguous unemployment reduction in the non-offshoring sector. Imperfect labor mobility can result in a mixed equilibrium in which only some firms in the industry offshore, with unemployment in this sector rising.trade, offshoring, search, unemployment

Can Offshoring Reduce Unemployment?

In this paper, in order to study the impact of offshoring on sectoral and economy wide rates of unemployment, we construct a two-sector, general-equilibrium model in which labor is mobile across the two sectors, and unemployment is caused by search frictions. We find that, contrary to general perception, wage increases and sectoral unemployment decreases due to offshoring. This result can be understood to arise from the productivity enhancing (cost reducing) effect of offshoring. If the search cost is identical in the two sectors, or is higher in the sector which experiences o¤shoring, the economy wide rate of unemployment decreases. When we modify the model to disallow intersectoral labor mobility, the negative relative price e¤ect on the offshoring sector may offset the positive productivity effect, and result in a rise in unemployment in that sector. In the other sector, offshoring has a much stronger unemployment reducing effect in this case.

Trade in Business Services in General Equilibrium

Trade in business services has been attracting attention from academic researchers, policy makers, and business journalists. While there are many anecdotes, there has been little in the way of formal theory applied to this issue. In this paper, we adapt a general model of fragmentation of production activities to try to capture the specific features of business services. Following a general discussion, we calibrate a numerical general-equilibrium simulation model to a situation in which both trade and foreign investment in services are initially banned to technically infeasible. We then compute three counter-factual scenarios: one in which trade but not investment in services is feasible or allowed, one in which investment but not trade is allowed, and onein which both trade and investment in services are allowed.

Explaining the wage gap: Heckscher-Ohlin, economic geography and services availability

In the debate on globalisation and wage inequality Heckscher-Ohlin, economic geography and services availability theory has featured prominently. However, a neglected mechanism by which globalisation affects labour market outcomes is through the in-creased tradability of producer services. By integrating elements of Heck-scher- Ohlin theory, the economic geography literature and the literature on producer services linkages, we show that the impact of globalisation on the relative wages is a sophisticated combination of the effects that play a key-role in these models. The most important result we find is that the fall in transportation costs of producer services might indeed have caused the sharp increase in wage inequality. (JEL F1, R1)