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Wage stickiness, offshoring and unemployment

Aloi, Marta; Hoefele, Andreas

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Authors

MARTA ALOI marta.aloi@nottingham.ac.uk
Associate Professor

Andreas Hoefele



Abstract

This note investigates how the effect of offshoring on unemployment is influenced by the wage setting process. We assume staggered wage contracts in an otherwise standard search and matching model. In this setup, the contract wage depends also on expected future conditions. We show that more flexibility in the wage contracting process induces greater offshoring, a decrease in the worker’s job-finding probability and higher worker’s wage within job spells. Notably, less stickiness leads to a fall in the rents that firms can extract by producing domestically.

Journal Article Type Article
Acceptance Date Jan 27, 2019
Online Publication Date Feb 1, 2019
Publication Date 2019-04
Deposit Date Feb 5, 2019
Publicly Available Date Aug 2, 2020
Journal Economics Letters
Print ISSN 0165-1765
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 177
Pages 56-59
DOI https://doi.org/10.1016/j.econlet.2019.01.025
Keywords Offshoring; Unemployment; Wage stickiness
Public URL https://nottingham-repository.worktribe.com/output/1518820
Publisher URL https://www.sciencedirect.com/science/article/pii/S0165176519300333?via%3Dihub

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