A model of trade, task offshoring and social insurance

Abstract

he 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.