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Fragmentation, Productivity and Relative Wages in the UK: A General Equilibrium Approach

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  • Hijzen, Alexander

    (University of Nottingham)

Abstract

Feenstra and Hanson (1999) propose a two-stop method to analyse the role of outsourcing and skill-biased technological change (SBTC) in the rise in wage inequality. This paper applies their methodology to UK manufacturing using data for the 1990s and extends it in order to obtain additional insight in the relative importance of the sector bias and the factor bias of outsourcing and SBTC. The results indicate that outsourcing has significantly contributed to the rise in the domestic wage inequality accounting for approximately 12% of the increase in the UK in the 1990s. Factor-biased outsourcing was about 2.5 times as important as sector-biased outsourcing in explaining the increase in wage inequality.

Suggested Citation

  • Hijzen, Alexander, 2003. "Fragmentation, Productivity and Relative Wages in the UK: A General Equilibrium Approach," Royal Economic Society Annual Conference 2003 108, Royal Economic Society.
    • Handle: RePEc:ecj:ac2003:108
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    Cited by:

    1. Geishecker, Ingo & Gorg, Holger, 2005. "Do unskilled workers always lose from fragmentation?," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 81-92, March.
    2. Alexander Hijzen, 2004. "Trade in Intermediates and the Rise in Wage Inequality in the UK: A GNP Function Approach," Econometric Society 2004 North American Summer Meetings 224, Econometric Society.
    3. Hartmut Egger & Udo Kreickemeier, 2017. "International Fragmentation: Boon or Bane for Domestic Employment?," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 9, pages 237-263, World Scientific Publishing Co. Pte. Ltd..
    4. Hijzen, Alexander & Görg, Holger & Hine, Robert C., 2003. "International Fragmentation and Relative Wages in the UK," IZA Discussion Papers 717, Institute of Labor Economics (IZA).
    5. Gorg, Holger & Hanley, Aoife, 2005. "International outsourcing and productivity: evidence from the Irish electronics industry," The North American Journal of Economics and Finance, Elsevier, vol. 16(2), pages 255-269, August.
    6. Alexander Hijzen & Holger Görg & Robert C. Hine, 2005. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Economic Journal, Royal Economic Society, vol. 115(506), pages 860-878, October.
    7. Ingo Geishecker & Holger Görg, 2003. "Winners and Losers: Fragmentation, Trade and Wages Revisited," Discussion Papers of DIW Berlin 385, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    fragmentation; outsourcing; productivity; madated wage regressions;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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