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Offshoring, Tasks, and the Skill-Wage Pattern

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  • Daniel Baumgarten
  • Ingo Geishecker
  • Holger Görg

Abstract

The paper investigates the relationship between offshoring, wages, and the ease with which individuals' tasks can be offshored. Our analysis relates to recent theoretical contributions arguing that there is only a loose relationship between the suitability of a task for offshoring and the associated skill level. Accordingly, wage effects of offshoring can be very heterogeneous within skill groups. We test this hypothesis by combining micro-level information on wages and demographic and workplace characteristics as well as occupational information relating to the degree of offshorability with industry-level data on offshoring. Our main results suggest that in partial equilibrium, wage effects of offshoring are fairly modest but far from homogeneous and depend significantly on the extent to which the respective task requires personal interaction or can be described as non-routine. When allowing for cross-industry movement of workers, i.e., looking at a situation closer to general equilibrium, the magnitude of the wage effects of offshoring becomes substantial. Low- and medium-skilled workers experience significant wage cuts due to offshoring which, however, again strongly depend on the degree of personal interaction and non-routine content.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 281.

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Length: 45 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp281

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Keywords: Tasks; Offshoring; Outsourcing; Skills; Wages;

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Citations

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Cited by:
  1. Geishecker, Ingo & Görg, Holger, 2008. "Services Offshoring and Wages: Evidence from Micro Data," IZA Discussion Papers 3593, Institute for the Study of Labor (IZA).
  2. Franz-Josef Bade & Eckhardt Bode & Eleonora Cutrini, 2012. "Spatial fragmentation of industries by functions," Working Papers, Macerata University, Department of Studies on Economic Development (DiSSE) 39-2012, Macerata University, Department of Studies on Economic Development (DiSSE), revised Feb 2012.
  3. Silvia Rocha-Akis, 2012. "The Pain and Gain of Offshoring: The Effects of Tax Progression in a Segmented Labour Market," CESifo Working Paper Series 3739, CESifo Group Munich.
  4. Görg, Holger & Görlich, Dennis, 2012. "Offshoring, Wages and Job Security of Temporary Workers," IZA Discussion Papers 6897, Institute for the Study of Labor (IZA).
  5. Becker, Sascha & Ekholm, Karolina & Muendler, Marc-Andreas, 2009. "Offshoring and the Onshore Composition of Tasks and Skills," Stirling Economics Discussion Papers, University of Stirling, Division of Economics 2009-18, University of Stirling, Division of Economics.
  6. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers, Banco de Portugal, Economics and Research Department w201403, Banco de Portugal, Economics and Research Department.
  7. Hogrefe, Jan, 2013. "Offshoring and relative labor demand from a task perspective," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 13-067, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Eckhardt Bode & Franz-Josef Bade Bade & Eleonora Cutrini Cutrini, 2011. "Domestic and International Offshoring of Tasks," ERSA conference papers ersa11p1840, European Regional Science Association.
  9. Julia Püschel, 2013. "Wage effects of U.S. service offshoring by skills and tasks," FIW Working Paper series, FIW 107, FIW.
  10. Lurweg, Maren & Uhde, Nicole, 2010. "International trade and individual labour market perspectives: A micro-level analysis of German manufacturing workers," CAWM Discussion Papers, Center of Applied Economic Research Münster (CAWM), University of Münster 31, Center of Applied Economic Research Münster (CAWM), University of Münster.
  11. Martin Borowiecki & Bernhard Dachs & Doris Hanzl-Weiss & Steffen Kinkel & Johannes Pöschl & Magdolna Sass & Thomas Christian Schmall & Robert Stehrer & Andrea Szalavetz, 2012. "Global Value Chains and the EU Industry," wiiw Research Reports 383, The Vienna Institute for International Economic Studies, wiiw.
  12. Nilsson Hakkala, Katariina & Heyman, Fredrik & Sjöholm, Fredrik, 2014. "Multinational firms, acquisitions and job tasks," European Economic Review, Elsevier, Elsevier, vol. 66(C), pages 248-265.
  13. Riedl, Maximilian, 2013. "Wage bargaining, job loss fears and offshoring," Center for European, Governance and Economic Development Research Discussion Papers 174, University of Goettingen, Department of Economics.

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