Offshoring, employment, and aggregate demand

Schröder, E.

doi:10.1007/s00191-018-0582-4

Offshoring, employment, and aggregate demand

Journal article (2018)

Authors

E. Schröder Economics of Technology and Innovation

Research Group

Economics of Technology and Innovation

DOI: https://doi.org/10.1007/s00191-018-0582-4

Germany Offshoring Global value chains Aggregate demand Labor demand Trade flows Unemployment

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Published Date

2018

Language

English

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Research Group

Economics of Technology and Innovation

Abstract

The article uses a demand-constrained small-open-economy model in the tradition of Keynes and Kalecki to study the effects of offshoring on aggregate demand and domestic employment. Offshoring is represented as labor-saving import-using technical change. The results depend on the behavior of the markup on unit costs. If higher markups absorb the competitiveness gain, the scale effect of labor demand is negative, and offshoring unambiguously reduces domestic demand and employment. If the markup remains constant, the net effect of offshoring on domestic demand and employment is ambiguous; it depends crucially on the price elasticity of exports.

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