Template-Type: ReDIF-Paper 1.0

Author-Name: Lutz G. Arnold
Author-X-Name-First: Lutz G.
Author-X-Name-Last: Arnold

Author-Name: Stefanie Trepl
Author-X-Name-First: Stefanie
Author-X-Name-Last: Trepl

Title: Taking Public Opinion Seriously: A General Equilibrium Model of Low-Wage Competition, Offshoring, and Unemployment

	
Abstract: This paper analyzes a North-South trade model with costly offshoring and equilibrium unemployment
due to union wage setting. Reductions in the amount of resources required in the
offshoring process usually decrease employment, though the opposite can happen at a low initial
level of offshoring activity. If additional offshoring leads to a fall in the scale of Northern firms,
the increase in Southern workers’ utility comes at the expense of a reduction in each Northern
agent’s welfare. The model can be used to make a case for a “pragmatic union leader”: unions
have an incentive to take measures that reduce their bargaining power. With firm heterogeneity,
there is scope for multiple equilibria.
Length:  42 pages
Creation-Date:  2011-06
File-URL: http://www.bgpe.de/texte/DP/101_ArnoldTrepl.pdf
File-Format: Application/pdf
File-Function: First version, 2011
Number: 101
Classification-JEL: F12, J64 
Keywords: offshoring, unemployment, North-South trade
Handle: RePEc:bav:wpaper:101_ArnoldTrepl