Question

Trade in Tasks and the Grossman and Rossi-Hansberg (2008)
model
Grossman and Rossi-Hansberg (2008) present a simple extension to the Heckscher-Ohlin-
Samuelson model which allows firms to relocate the low-skilled labor-intensive parts of the
production process to a low-wage country. In other words, they present a simple model of
offshoring, intermediate input trade, or global value chains (GVCs). Besides the mathemat-
ical model, the authors also introduce the concept of trade in tasks, as they view production
as a chain of several tasks which have to be performed to arrive at the final product. In
this view, the low-skilled labor-intensive tasks of production are moved to the cheap offshore
destination country, whereas the high-skill intensive tasks remain onshore, i.e., in the high
wage country.

(c) What does I represent? How is I determined? State the key equilibrium condition and
explain verbally! How do international wage differences  affect the amount of offshoring?
Show graphically!

References
Grossman, G. M., and E. Rossi-Hansberg (2008): \Trading Tasks: A Simple Theory
of Offshoring," American Economic Review, 98(5), 1978{97.

Answer 1

In the grossman and Rossi Hansberg model the production process is conceptualised in terms of the task. The former is referred to as L task and the latter is referred to as H task. the measure of task of the each industry which employ any given factor of production is normalised and equal to 1.if L task i and at home i' are undertaken in the process of production of goods j then the forms used the equal amount of a low skilled labour domestically for performing the task I. The case in which the offshoring cost are quite similar photo industries are benchmarked.
tx(i)=ty(i)=t(i).in the IT industry the marginal task done at the home has the equal index I which condition determines that savings of which only balances the offshoring cost. The grossman and Rossi Hansberg model is simple a model offshoring. It states offshoring as the shadow migration which permits the harsimonious derivation of all the necessary conditions and the condition which are also sufficient for the effects on the wages and prices and the production as well as trade. This model can be further extended for allowing the intra firm and the international firm in production being fragmented and the way it implies that the profits from the offshoring are being shared in between the nation and the factors within the Nations.