Offshoring, globalization, and welfare

Yiming Zhou, Dao Zhi Zeng

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

We investigate the issue of offshoring in a general-equilibrium model of two countries and one sector of increasing returns to scale. Our model uncovers that offshoring occurs and endogenously evolves in a bell-shaped pattern when trade costs decline, explaining some stylized facts in developed countries. Furthermore, this simple framework can be applied to examine the welfare issue. We find that a fall in offshoring costs benefits the high-wage country but hurts the low-wage country. On the other hand, the low-wage country benefits with trade liberalization. The impact of falling trade costs on the welfare of the high-wage country depends on the values of offshoring freeness.

Original languageEnglish
Pages (from-to)75-93
Number of pages19
JournalNorth American Journal of Economics and Finance
Volume31
DOIs
Publication statusPublished - 2015 Jan 1

Keywords

  • Footloose capital
  • Globalization
  • Offshoring
  • Welfare

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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