Please cite this article in press as: Burnett, P., & Cutler, H. The transitional impacts of material and service offshoring. Journal of Policy Modeling (2017), https://doi.org/10.1016/j.jpolmod.2017.10.001 ARTICLE IN PRESS +Model JPO-6388; No. of Pages 15 Journal of Policy Modeling xxx (2017) xxx–xxx Available online at www.sciencedirect.com ScienceDirect The transitional impacts of material and service offshoring Perry Burnett a,* , Harvey Cutler b a Department of Economics and Marketing, University of Southern Indiana, Evansville, IN 47712, United States b Department of Economics, Colorado State University, Fort Collins, CO 80523, United States Received 23 March 2017; received in revised form 12 July 2017; accepted 20 September 2017 Abstract The recent expansion of offshoring intermediate services has given rise to public fears and a possible pullback from a liberal trading system. Modeling and estimating intermediate offshoring is complicated since the shock is further down the production process. This paper incorporates the necessary transmission mechanisms into a data-intensive CGE model for the State of Colorado to estimate the current and future impacts of continuing a liberal trade policy for offshoring intermediates. The results indicate that while the overall effects of offshoring are small and positive, the future directions of service offshoring are projected to cause sizable domestic job destruction and displacement. Policies may have to be implemented to retrain domestic workers who face job loss or even consider curtailing future offshoring opportunities. © 2017 The Society for Policy Modeling. Published by Elsevier Inc. All rights reserved. JEL classifications: F16; J31; F66; L80 Keywords: Service offshoring; Material offshoring; Wage inequality; Job destruction; Offshoring transition 1. Introduction The Alvin Hansen Symposium on Public Policy at Harvard University in 2009 hosted a vigor- ous debate on the potential role of offshoring as it becomes a larger factor in the U.S. economy. An aspect of this debate can be viewed from the perspective of job destruction and transition. * Corresponding author at: 8600 University Blvd, Evansville, IN 47712, United States. E-mail addresses: paburnett@usi.edu (P. Burnett), Harvey.cutler@colostate.edu (H. Cutler). https://doi.org/10.1016/j.jpolmod.2017.10.001 0161-8938/© 2017 The Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.