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Winners and losers: a micro-level analysis of international outsourcing and wages

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Author Info
Ingo Geishecker
Holger Görg

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Abstract

Our paper investigates the link between international outsourcing and wages utilizing a large household panel and combining it with industry-level information on industries' outsourcing activities from input-output tables. This approach avoids problems such as aggregation bias, potential endogeneity bias, and poor skill definitions that commonly hamper industry-level studies. We find that outsourcing has had a marked impact on wages. Applying two alternative skill classifications, we find evidence that a 1 percentage point increase in outsourcing reduced the wage for workers in the lowest skill categories by up to 1.5%, while it increased wages for high-skilled workers by up to 2.6%. This result is robust to a number of different specifications.

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File URL: http://economics.ca/cgi/xms?jab=v41n1/CJEv41n1p0243.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 41 (2008)
Issue (Month): 1 (February)
Pages: 243-270
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Handle: RePEc:cje:issued:v:41:y:2008:i:1:p:243-270

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Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

Cited by:
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  1. Ronald Bachmann & Sebastian Braun, 2008. "The Impact of International Outsourcing on Labour Market Dynamics in Germany," Ruhr Economic Papers 0053, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
    Other versions:
  2. 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!]
  3. Koskela, Erkki, 2009. "Impacts of Labor Taxation with Perfectly and Imperfectly Competitive Domestic Labor Markets under Flexible Outsourcing," IZA Discussion Papers 4544, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Ingo Geishecker & Holger Görg & Jakob Roland Munch, 2008. "Do Labour Market Institutions Matter?: Micro-Level Wage Effects of International Outsourcing in Three European Countries," SOEPpapers 81, DIW Berlin, The German Socio-Economic Panel (SOEP). [Downloadable!]
    Other versions:
  5. 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!]
  6. 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!]
  7. 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!]
  8. Hartmut Egger & Udo Kreickemeier, 2008. "Fairness, Trade, and Inequality," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  9. Jakob Munch & Jan Skaksen, 2009. "Specialization, outsourcing and wages," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(1), pages 57-73, April. [Downloadable!] (restricted)
    Other versions:
  10. Steven Poelhekke & Frederick Van der Ploeg, 2008. "Globalization and the Rise of Mega-Cities in the Developing World," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  11. 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!]
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This page was last updated on 2009-12-21.

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