Exporting and Offshoring with Monopsonistic Competition

Abstract We develop a model of international trade with heterogeneous firms and monopsonistically competitive labour markets. show that due to monopsonistic competition our makes sharply different predictions about the effects export goods offshoring tasks. Trade in is unambiguously welfare increasing as domestic resources are reallocated large high productivity low productivities exit market thereby reducing monopsony distortion present autarky. Offshoring, however, gives additional scope for exercising power by their size therefore can lead losses.