Trading Tasks: A Simple Theory of Offshoring

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Introduction The Model ConclusionTowards a New ParadigmA different conceptualization of the production processProduction of every good requires the performance of a continuum of tasks byeach of the factors of productionTasks might be performed in different locationsFirms are motivated to offshore tasks by factor-cost savings, but trading tasks iscostlyA model with two industries, perfect competition, and two factors ofproductionThe authors study how decreases in offshoring costs affect the wages ofdifferent types of laborThey nd that low-skilled workers may benet from the production oflow-skilled tasks abroadGrossman and Rossi-Hansberg (Princeton University) A Simple Theory of Offshoring March, 2010 4 / 17
Introduction The Model ConclusionThe ModelModel allows trade in tasks, as well as trade in goodsProduction involves a continuum of L tasks and continuum of H tasksIndustries differ in factor intensity, as usualNormalize measure of tasks of each type to oneCost of offshoring task i is given by βt(i) 1Order tasks so t 0 (i) 0 and assume t(i) is continuously differentiableFor the moment only L-tasks can be offshore and same t(i) schedule in eachindustryGrossman and Rossi-Hansberg (Princeton University) A Simple Theory of Offshoring March, 2010 5 / 17
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Trading Tasks: A Simple Theory of Offshoring

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