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The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990

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  • Robert C. Feenstra
  • Gordon H. Hanson

Abstract

We estimate the relative influence of trade versus technology on wages in a "large-country" setting, where technological change affects product prices. Trade is measured by the foreign outsourcing of intermediate inputs, while technological change is measured by expenditures on high-technology capital such as computers. The estimation procedure we develop, which modifies the conventional "price regression," is able to distinguish whether product price changes are due to factor-biased versus sector-biased technology shifts. In our base specification we find that computers explain about 35 percent of the increase in the relative wage of nonproduction workers, while outsourcing explains 15 percent; both of these effects are higher in other specifications.

Suggested Citation

  • Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 907-940.
    • Handle: RePEc:oup:qjecon:v:114:y:1999:i:3:p:907-940.
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