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.
Dieser Eintrag ist Teil der Universitätsbibliographie.
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