Jens Wrona

Trade, tasks, and training: The effect of offshoring on individual skill upgrading

We offer a theoretical explanation and empirical evidence for a positive link between increased offshoring and individual skill upgrading. Skill upgrading takes the form of on-the-job training, complementing the existing literature, which mainly focuses on the retraining of displaced workers. To establish a link between offshoring and on-the-job training, we introduce an individual skill upgrading margin into the Grossman and Rossi-Hansberg ( ) model of offshoring. By scaling up workers wages, offshoring creates previously unexploited skill upgrading possibilities, which lead to more training. Using data from German manufacturing, we establish a causal link between industry-level offshoring growth and increased individual skill upgrading.

Two-Way Migration between Similar Countries

We develop a model to explain two-way migration of high-skilled individuals between countries that are similar in their economic characteristics. High-skilled migration results from the combination of workers whose abilities are private knowledge, and a production technology that gives incentives to firms for hiring workers of similar ability. In the presence of migration cost, high-skilled workers self-select into the group of migrants. The laissez-faire equilibrium features too much migration, explained by a negative migration externality. We also show that for sufficiently low levels of migration cost the optimal level of migration, while smaller than in the laissez-faire equilibrium, is strictly positive. Finally, we extend our model into different directions to capture stylized facts in the data and show that our baseline results also hold in these more complex modelling environments.