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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. Egger, Hartmut & Egger, Peter, 2005. "Labor market effects of outsourcing under industrial interdependence," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 349-363.
  2. Christian Keuschnigg & Evelyn Ribi, 2007. "Outsourcing, Unemployment and Welfare Policy," University of St. Gallen Department of Economics working paper series 2007 2007-41, Department of Economics, University of St. Gallen.
  3. Nobuaki Yamashita, 2008. "The Impact of Production Fragmentation on Skill Upgrading: New Evidence from Japanese Manufacturing," Departmental Working Papers 2008-06, The Australian National University, Arndt-Corden Department of Economics.
  4. Andersson, Linda & Karpaty, Patik, 2012. "Firm Level Effects of Offshoring of Goods and Services on Relative Labor Demand," Working Papers 2013:2, Örebro University, School of Business.
  5. Christian Keuschnigg, 2009. "Corporate Taxation and the Welfare State," CESifo Working Paper Series 2557, CESifo Group Munich.
  6. Cadarso, Maria Angeles & Gomez, Nuria & Lopez, Luis Antonio & Tobarra, Maria Angeles, 2008. "The EU enlargement and the impact of outsourcing on industrial employment in Spain, 1993-2003," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 95-108, March.
  7. Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, The European Institute of Japanese Studies.
  8. 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.
  9. Koskela, Erkki & Stenbacka, Rune, 2010. "Equilibrium unemployment with outsourcing and wage solidarity under labour market imperfections," European Economic Review, Elsevier, vol. 54(3), pages 376-392, April.
  10. Sethupathy, Guru, 2013. "Offshoring, wages, and employment: Theory and evidence," European Economic Review, Elsevier, vol. 62(C), pages 73-97.
  11. Gorg, Holger & Hanley, Aoife, 2005. "Labour demand effects of international outsourcing: Evidence from plant-level data," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 365-376.

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