Question: a) Consider an offshoring model in which: - Home's skilled labour has a lower relative wage than Foreign's skilled labour, and - the costs of

a) Consider an offshoring model in which:

- Home's skilled labour has a lower relative wage than Foreign's skilled labour, and

- the costs of capital and trade are equal cross production activities.

With trade via offshoring, what will happen to the relative wage of high-skilled labour in both countries? Explain.

b)The Figure below shows a positive correlation between offshoring and the change in the number of workers between 2006 and 2009. Explain why offshoring can create more jobs at home.

(Note that the vertical axis represents the average number of workers in each type of firms).

a) Consider an offshoring model in which:- Home's skilled labour has a

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