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International Outsourcing, Technological Change, and Wage Inequality

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Author Info
Alexander Hijzen

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Abstract

This paper analyzes the impact of international outsourcing on UK wage inequality during the 1990s by applying the mandated wage approach proposed by Feenstra and Hanson (1999). The methodology is extended in order to obtain additional insight into the relative importance of the factor and sector bias of international outsourcing and technological change. The results indicate that technological change is the predominant force behind the increase in wage inequality, but international outsourcing also contributed significantly. In explaining the increase in wage inequality the factor bias of technological change was slightly larger than its sector bias, while for international outsourcing the sector bias was much more important. The relative importance of the two effects hinges crucially on the estimated rate of productivity passthrough. Copyright © 2006 The Author; Journal compilation © 2006 Blackwell Publishing Ltd.

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File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-9396.2006.00623.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 15 (2007)
Issue (Month): 1 (02)
Pages: 188-205
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Handle: RePEc:bla:reviec:v:15:y:2007:i:1:p:188-205

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  1. Koskela, Erkki & Poutvaara, Panu, 2008. "Outsourcing and Labor Taxation in Dual Labor Markets," IZA Discussion Papers 3522, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Alexander HIJZEN & INUI Tomohiko & TODO Yasuyuki, 2007. "Does Offshoring Pay? Firm-Level Evidence from Japan," Discussion papers 07005, Research Institute of Economy, Trade and Industry (RIETI). [Downloadable!]
    Other versions:
  3. Aronsson, Thomas & Koskela, Erkki, 2008. "Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment," UmeÃ¥ Economic Studies 759, Umeå University, Department of Economics. [Downloadable!]
  4. Erkki Koskela & Jan König, 2009. "The Role of Profit Sharing in a Dual Labour Market with Flexible Outsourcing," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Erkki Koskela & Panu Poutvaara, 2008. "Flexible Outsourcing and the Impacts of Labour Taxation in European Welfare States," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  6. Amador, João & Cabral, Sónia, 2008. "International fragmentation of production in the Portuguese economy: What do different measures tell us?," MPRA Paper 9783, University Library of Munich, Germany. [Downloadable!]
  7. Thomas Aronsson & Erkki Koskela, 2008. "Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  8. Aronsson, Thomas & Koskela, Erkki, 2009. "Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment," IZA Discussion Papers 4196, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Robert Anderton & Paul Hiebert, . "The Impact of Globalisation on the Euro Area Macroeconomy," Discussion Papers 09/14, University of Nottingham, GEP. [Downloadable!]
  10. Böckerman, Petri & Riihimäki, Elisa, 2009. "International outsourcing and labour demand: Evidence from Finnish firm-level data," MPRA Paper 16903, University Library of Munich, Germany. [Downloadable!]
  11. Colin Davies & Alireza Naghavi, 2008. "Offshoring Production: A Simple Model of Wages, Productivity, and Growth," Center for Economic Research (RECent) 027, University of Modena and Reggio E., Dept. of Economics. [Downloadable!]
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