O¤shoring, Unemployment, and Wages: The role of labor market institutions
نویسنده
چکیده
It is shown that when wages are determined through collective bargaining, there is a non-monotonic relationship between the cost of o¤shoring and unemployment. Starting from a high cost of o¤shoring, a decrease in the cost of o¤shoring reduces unemployment rst and then increases it. The non-monotonicity of unemployment in the cost of o¤shoring does not obtain if wages are determined by individual Nash bargaining instead of collective bargaining. The non-monotonic relationship between the cost of o¤shoring and unemployment is veri ed through a calibration exercise performed using parameters for Sweden. The calibration exercise predicts that a decrease in the cost of o¤shoring, starting from the present level, would reduce unemployment in Sweden. In a two country framework of o¤shoring (source country and host country) it is shown how changes in the labor market institutions in one country a¤ect labor market outcomes in both countries. Key words: o¤shoring, unemployment, collective bargaining, unions, unemployment bene ts, recruitment cost
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a r t i c l e i n f o It is shown that when wages are determined through collective bargaining, there is a non-monotonic relationship between the cost of offshoring and unemployment. Starting from a high cost of offshoring, a decrease in the cost of offshoring reduces unemployment first and then increases it. The non-monotonicity of unemployment in the cost of offshoring does not obtain if wage...
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