Trading Tasks: A Simple Theory of Offshoring

Abstract

We propose a theory of the global production process that focuses on tradeable tasks, and use it to study how falling costs of offshoring affect factor prices in the source country. We identify a productivity effect of task trade that benefits the factor whose tasks are more easily moved offshore. In the light of this effect, reductions in the cost of trading tasks can generate shared gains for all domestic factors, in contrast to the distributional conflict that typically results from reductions in the cost of trading goods. (JEL F11, F16)

The Legacy of Conventional Textbook Trade Theory in the Light of Globalization

“…The key insight from these diverse contributions is that "vertical disintegration" opens up new possibilities for generating gains from specialization and foreign trade (Baldwin & Robert-Nicoud, 2007). G. Grossman and Rossi-Hansberg (2006a;2006b) conceptualized an alternative model where production hinges on foreign trade in tasks, equivalent to individual steps which are executed either domestically or abroad by various factors (inter alia capital, unskilled-and skilled-labor, etc.). In analogy to the Heckscher-Ohlin model, it presupposes two goods and two countries of different factor intensities and factor endowments, respectively.…”

Collecting information on job tasks—an instrument to measure tasks required at the workplace in a multi-topic survey

“…A related line of research that also depends heavily on the availability of job task information focuses on the offshoreability of jobs, defining offshoreability as the likelihood or the risk of a particular job to be transferred abroad (Jensen and Kletzer 2010, Blinder 2009Grossman and Rossi-Hansberg 2008). Gathering proper information on job tasks is crucial in this case as well, since at the core of this concept is the notion that a job is considered "offshoreable" if the tasks performed as part of it should-in principle-allow for it being moved abroad.…”

Cross-Border Investment, Heterogeneous Workers, and Employment Security – Evidence from Germany

“…This type of FDI can be interpreted as offshoring within the boundaries of the firm. While it is likely that offshoring leads to reduced labour demand for some groups of workers, the effect might be offset by a productivity increase that stems from cost savings and benefits workers of some if not all skill groups (Grossman and Rossi-Hansberg, 2008). While most researchers assume that horizontal investments are the prevalent mode of FDI, others argue that most FDI is neither purely horizontal nor purely vertical (Helpman, 2006;Alfaro and Charlton, 2009).…”