A model of trade, task offshoring and social insurance
The purpose of this paper is to study the role of social insurance design in a comparative-advantage model of offshoring and trade. To do so, we incorporate social insurance into a modified version of the Grossman and Rossi-Hansberg (Am Econ Rev 98(5):1978–1997, 2008) model by formalizing its administrative, compensation, cost, labor-supply and productivity effects. The compensation and productivity effects, which are novel, give rise to important offshoring and trade implications that can contribute to explain how social insurance provision can be sustained under globalization pressure and why similar globalization pressure can lead to different skill premia developments in Western economies.
KeywordsTrade Task offshoring Social insurance
JEL classificationsF11 F16 I18 J65
Financial support from the Swedish Social Insurance Agency is gratefully acknowledged. The author thanks an anonymous referee for detailed improvement recommendations and Andreas Bergh, Eric Bond, Ian Coxhead, Uwe Fachinger, Fredrik Heyman, Henrik Horn, Agneta Kruse and Fredrik Sjöholm for valuable comments. The paper has benefited from helpful suggestions of seminar participants at Department of Economics, Lund University, Research Institute of Industrial Economics, Stockholm and School of Business and Economics, RWTH Aachen University and fruitful discussions with participants at the ‘European Economic Integration: Present and Future Challenges’ Workshop in Lisbon and the ‘Globalization: Strategies and Effects’ conference in Koldingfjord.
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