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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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-12/cesifo1_wp1616.pdf
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Bibliographic Info

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. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Department of Economics 95-14, California Davis - Department of Economics.
  2. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
  3. Berman, E. & Bound, J. & Machin, S., 1997. "Implications of Skill-Biased Technological Change: International Evidence," Papers 25, Centre for Economic Performance & Institute of Economics.
  4. Dalia Marin, 2006. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 612-622, 04-05.
  5. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  6. Giovanni S.F. Bruno & Rosario Crinò & Anna M. Falzoni, 2004. "Foreign Direct Investment, Wage Inequality, and Skilled Labor Demand in EU Accession Countries," Development Working Papers 188, Centro Studi Luca d\'Agliano, University of Milano.
  7. Marin, Dalia, 2004. "'A Nation of Poets and Thinkers' - Less So with Eastern Enlargement? Austria and Germany," Discussion Papers in Economics 329, University of Munich, Department of Economics.
  8. 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, vol. 109(2), pages 367-97, May.
  9. Bob Anderton & Paul Brenton, 1998. "Outsourcing and Low-Skilled Workers in the UK," CSGR Working papers series 12/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
  10. Nina Pavcnik, 2000. "What Explains Skill Upgrading in Less Developed Countries?," NBER Working Papers 7846, National Bureau of Economic Research, Inc.
  11. Marin, Dalia, 1995. "Learning and Dynamic Comparative Advantage: Lessons from Austria's Postwar Pattern of Growth for Eastern Europe," Discussion Papers in Economics 610, University of Munich, Department of Economics.
  12. 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.
  13. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
  14. 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.
  15. Lorentowicz, Andzelika & Marin, Dalia & Raubold, Alexander, 2002. "Ownership, Capital or Outsourcing: What Drives German Investment to Eastern Europe?," CEPR Discussion Papers 3515, C.E.P.R. Discussion Papers.
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Cited by:
  1. Crinò, Rosario, 2012. "Imported inputs and skill upgrading," Labour Economics, Elsevier, vol. 19(6), pages 957-969.
  2. Ben J. Heijdra & Jenny Ligthart, 2006. "The Transitional Dynamics of Fiscal Policy in Small Open Economies," CESifo Working Paper Series 1777, CESifo Group Munich.
  3. Piero Esposito & Robert Stehrer, 2009. "The sector bias of skill-biased technical change and the rising skill premium in transition economies," Empirica, Springer, vol. 36(3), pages 351-364, August.
  4. 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, vol. 34(3), pages 337-360.
  5. Mary Amiti & Shang-Jin Wei, 2005. "Service Offshoring, Productivity, and Employment: Evidence from the United States," IMF Working Papers 05/238, International Monetary Fund.
  6. Rosario Crinò, 2007. "Offshoring, Multinationals and Labor Market: A Review of the Empirical Literature," KITeS Working Papers 196, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jan 2007.
  7. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," NBER Working Papers 12885, National Bureau of Economic Research, Inc.
  8. Dalia Marin, 2006. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 612-622, 04-05.
  9. Marin, Dalia, 2005. "A New International Division of Labor in Europe: Offshoring and Outsourcing to Eastern Europe," Discussion Papers in Economics 714, University of Munich, Department of Economics.

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