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Outsourcing and skill-specific employment in a small economy: Austria after the fall of the Iron Curtain

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Author Info

  • Hartmut Egger
  • Peter Egger

Abstract

We set up a model, in which firms in a small industrialized country outsource part of their production to a foreign economy, which is rich in low-skilled labour. We analyse, how a decline in trade costs affects outsourcing activities and the production structure in the small economy. A stimulation of cross-border outsourcing raises wage dispersion and, if labour markets are unionized, also the employment of high-skilled relative to low-skilled labour. Using a panel of Austrian industries, we find, first, that decreasing trade barriers--as observed after the fall of the Iron Curtain--indeed stimulate outsourcing to Central and Eastern Europe and the former Soviet Union, and, second, that outsourcing to these countries significantly shifts relative employment in favour of high-skilled labour. Copyright 2003, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 55 (2003)
Issue (Month): 4 (October)
Pages: 625-643

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Handle: RePEc:oup:oxecpp:v:55:y:2003:i:4:p:625-643

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Cited by:
  1. João Amador & Sónia Cabral, 2008. "International Fragmentation of Production in the Portuguese Economy: What do Different Measures Tell Us?," Working Papers w200811, Banco de Portugal, Economics and Research Department.
  2. Christian Keuschnigg, 2008. "Corporate Taxation and the Welfare State," Working Papers 0813, Oxford University Centre for Business Taxation.
  3. Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, The European Institute of Japanese Studies.

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