Working Paper: CEPR ID: DP6218
Authors: Richard Baldwin; Frdric Robert-Nicoud
Abstract: A simple model of offshoring, which depicts offshoring as ?shadow migration,? permits straightforward derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems, so econometricians who ignore offshoring might reject the Heckscher-Ohlin theorem when a properly specified version held in the data. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. The model is extended to allow for two-way offshoring between similar nations, and to allow for monopolistic competition.
Keywords: Interindustry trade; Intraindustry trade; Offshoring; Shadow migration; Trade theorems
JEL Codes: F02; F12; L22; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| offshoring (F23) | wages (J31) |
| offshoring (F23) | production (L23) |
| offshoring (F23) | trade patterns (F10) |
| offshoring (F23) | Heckscher-Ohlin theorem (F11) |
| offshoring (F23) | intraindustry trade (F12) |
| offshoring (F23) | ambiguous general equilibrium effects on production (D51) |
| relative shadow migration of labor and capital (F16) | wages (J31) |
| offshoring (F23) | factor owners of the offshoring nation (F23) |