Offshoring and labor income risk


Hogrefe, Jan ; Yao, Yao


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URL: https://ub-madoc.bib.uni-mannheim.de/32221
URN: urn:nbn:de:bsz:180-madoc-322210
Document Type: Working paper
Year of publication: 2012
The title of a journal, publication series: ZEW Discussion Papers
Volume: 12-025
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > VWL, insbes. Makroökonomik u. Wirtschaftspolitik (Krebs)
Sonstige Einrichtungen > Zentrum für Europ. Wirtschaftsforschung (ZEW)
MADOC publication series: Veröffentlichungen des ZEW (Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: F16 , F23 , E24,
Keywords (English): Trade , offshoring , wages , labor income risk
Abstract: This paper analyzes the impact increased offshoring has on labor income risk. It is therefore distinct from a large number of studies explaining the level effects of globalization on the labor market in that it takes a look at effects on second moments, i.e. the variance of incomes. It provides an assessment that directly connects labor income risk and offshoring trends at the sector level. Importantly, we distinguish between transitory and permanent shocks to individual income. Permanent income risk is defined as variance of shocks to income that do not fade out over time and are assumed to be not self-insurable. It thus has a particular relevance for individual welfare. Our findings suggest that offshoring tends to lower permanent income risk. This effect is particularly strong for offshoring to low-income destinations. Hence, there could be potential welfare gains when domestic firms increasingly offshore production to foreign countries.

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Hogrefe, Jan ; Yao, Yao (2012) Offshoring and labor income risk. Open Access ZEW Discussion Papers Mannheim 12-025 [Working paper]
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