Offshoring and wage convergence

The recent advances in communication technology are changing the structure of the labor market in the United States. Jobs, which previously had to be done in the United States, can now be done offshore and thus American companies can take advantage of the wage differentials between countries. To see the potential effects that such a structural change may have on economic growth, we first examine the 19th century convergence between Europe and the New World countries. Thereafter we introduce a model of economic growth that will take into account a particular aspect of present day offshoring. Many of the workers being brought into the United States labor market are highly skilled. After this, we introduce Skill-Biased Technological Change and look at how it may be affected by offshoring.