Offshoring, globalization, and welfare

Yiming Zhou; Dao Zhi Zeng

doi:10.1016/j.najef.2014.10.004

Offshoring, globalization, and welfare

Yiming Zhou, Dao Zhi Zeng

INF - Human-Social Information Sciences

Research output: Contribution to journal › Article › peer-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 language	English
Pages (from-to)	75-93
Number of pages	19
Journal	North American Journal of Economics and Finance
Volume	31
DOIs	https://doi.org/10.1016/j.najef.2014.10.004
Publication status	Published - 2015 Jan 1

Keywords

Footloose capital
Globalization
Offshoring
Welfare

ASJC Scopus subject areas

Finance
Economics and Econometrics

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title = "Offshoring, globalization, and welfare",

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.",

keywords = "Footloose capital, Globalization, Offshoring, Welfare",

author = "Yiming Zhou and Zeng, {Dao Zhi}",

note = "Funding Information: We thank an anonymous referee and the editor for valuable comments and suggestions that have greatly improved the paper. We also thank Taiji Furusawa, Hiroyuki Mizuta, Hajime Takatsuka and participants in the APTS 2012 and Japanese Economic Association Spring Meeting 2012 for helpful comments. The first author is grateful to the scholarship provided by China Scholarship Council for his doctoral study at Tohoku University. This research was partially funded by JSPS KAKENHI Grant Numbers 26380282 , 24243036 , 24330072 of Japan and Key Project of National Social Science Foundation Number 13AZD082 of China. ",

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doi = "10.1016/j.najef.2014.10.004",

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AU - Zhou, Yiming

AU - Zeng, Dao Zhi

N1 - Funding Information: We thank an anonymous referee and the editor for valuable comments and suggestions that have greatly improved the paper. We also thank Taiji Furusawa, Hiroyuki Mizuta, Hajime Takatsuka and participants in the APTS 2012 and Japanese Economic Association Spring Meeting 2012 for helpful comments. The first author is grateful to the scholarship provided by China Scholarship Council for his doctoral study at Tohoku University. This research was partially funded by JSPS KAKENHI Grant Numbers 26380282 , 24243036 , 24330072 of Japan and Key Project of National Social Science Foundation Number 13AZD082 of China.

PY - 2015/1/1

Y1 - 2015/1/1

N2 - 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.

AB - 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.

KW - Footloose capital

KW - Globalization

KW - Offshoring

KW - Welfare

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