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Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland

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  • Andzelika Lorentowicz
  • Dalia Marin
  • Alexander Raubold

Abstract

Feenstra and Hanson (1997) have argued in the context of the North American Free Trade Agreement that US outsourcing to Mexico leads to an increase in the skill premium in both the US and Mexico. In this paper we show on the example of Austria and Poland that with the new international division of labour emerging in Europe Austria, the high income country, is specializing in the low skill intensive part of the value chain and Poland, the low income country, is specializing in the high skill part. As a result, skilled workers in Austria are losing from outsourcing, while gaining in Poland. In Austria, relative wages for human capital declined by 2 percent during 1995-2002 and increased by 41 percent during 1994-2002 in Poland. In both countries outsourcing contributes roughly 35 percent to these changes in the relative wages for skilled workers. Furthermore, we show that Austria's R&D policy has contributed to an increase in the skill premium there.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1616.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1616

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  1. Lorentowicz, Andzelika & Marin, Dalia & Raubold, Alexander, 2002. "Ownership, Capital or Outsourcing: What Drives German Investment to Eastern Europe?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3515, C.E.P.R. Discussion Papers.
  2. Eli Berman & John Bound & Stephen Machin, 1997. "Implications of Skill-Biased Technological Change: International Evidence," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 78, Boston University, Institute for Economic Development.
  3. Marin, Dalia, 2006. "A new international division of labor in Europe: Outsourcing and offshoring to Eastern Europe," Munich Reprints in Economics, University of Munich, Department of Economics 19229, University of Munich, Department of Economics.
  4. Anderton, Bob & Brenton, Paul, 1999. "Outsourcing and Low-Skilled Workers in the UK," Bulletin of Economic Research, Wiley Blackwell, Wiley Blackwell, vol. 51(4), pages 267-85, October.
  5. Ingo Geishecker, 2002. "Outsourcing and the Demand for Low-skilled Labour in German Manufacturing: New Evidence," Discussion Papers of DIW Berlin 313, DIW Berlin, German Institute for Economic Research.
  6. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, Elsevier, vol. 42(3-4), pages 371-393, May.
  7. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Investment, Outsourcing and Relative Wages," NBER Working Papers 5121, National Bureau of Economic Research, Inc.
  8. Marin, Dalia, 2004. "'A Nation of Poets and Thinkers' - Less So with Eastern Enlargement? Austria and Germany," Discussion Papers in Economics, University of Munich, Department of Economics 329, University of Munich, Department of Economics.
  9. Marin, Dalia, 1995. "Learning and Dynamic Comparative Advantage: Lessons from Austria's Post-war Pattern of Growth for Eastern Europe," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1116, C.E.P.R. Discussion Papers.
  10. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 240-45, May.
  11. Peter Egger, . "A Note on the Proper Econometric Specification of the Gravity Equation," WIFO Working Papers, WIFO 108, WIFO.
  12. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(2), pages 367-97, May.
  13. Giovanni S.F. Bruno & Anna M.Falzoni & Rosario Crinò, 2005. "Foreign Direct Investment, Wage Inequality, and Skilled Labor Demand in EU Accession Countries," Working Papers, University of Bergamo, Department of Economics 0501, University of Bergamo, Department of Economics.
  14. Pavcnik, Nina, 2003. "What explains skill upgrading in less developed countries?," Journal of Development Economics, Elsevier, Elsevier, vol. 71(2), pages 311-328, August.
  15. Markus Diehl, 1999. "The Impact of International Outsourcing on the Skill Structure of Employment: Empirical Evidence from German Manufacturing Industries," Kiel Working Papers 946, Kiel Institute for the World Economy.
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Cited by:
  1. Rosario Crinò, 2007. "Offshoring, Multinationals and Labor Market: A Review of the Empirical Literature," KITeS Working Papers, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy 196, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jan 2007.
  2. Marin, Dalia, 2006. "A New International Division of Labour in Europe: Outsourcing and Offshoring to Eastern Europe," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5447, C.E.P.R. Discussion Papers.
  3. Heijdra, B.J. & Ligthart, J.E., 2006. "The Transitional Dynamics of Fiscal Policy in Small Open Economies," Open Access publications from Tilburg University urn:nbn:nl:ui:12-199394, Tilburg University.
  4. Crinò, Rosario, 2012. "Imported inputs and skill upgrading," Labour Economics, Elsevier, Elsevier, vol. 19(6), pages 957-969.
  5. Marin, Dalia, 2005. "A New International Division of Labor in Europe: Offshoring and Outsourcing to Eastern Europe," Discussion Papers in Economics, University of Munich, Department of Economics 714, University of Munich, Department of Economics.
  6. Michael Pflüger & Uwe Blien & Joachim Möller & Michael Moritz, 2013. "Literature Overview - Labor Market Effects of Trade and FDI – Recent Advances and Research Gaps," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 233(1), pages 86-116, January.
  7. Guido Cazzavillan & Krzysztof Olszewski, 2009. "Skill-biased technological change and endogenous labor supply in EU Transition Economies and the US," Working Papers 2009_12, Department of Economics, University of Venice "Ca' Foscari".
  8. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
  9. Piero Esposito & Robert Stehrer, 2007. "The Sector Bias of Skill-biased Technical Change and the Rising Skill Premium in Transition Economies," wiiw Working Papers, The Vienna Institute for International Economic Studies, wiiw 43, The Vienna Institute for International Economic Studies, wiiw.
  10. Özlem Onaran, 2008. "The Effects of Globalization on Wages, Employment, and Wage Share in Austria," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 34(3), pages 337-360.
  11. Mary Amiti & Shang-Jin Wei, 2005. "Service offshoring, Productivity, and Employment," IMF Working Papers 05/238, International Monetary Fund.

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