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Specialization, Outsourcing and Wages

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Author Info
Munch, Jakob Roland (Department of Economics, Copenhagen Business School)
Skaksen, Jan Rose (Department of Economics, Copenhagen Business School)

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Abstract

This paper studies the impact of outsourcing on individual wages. In contrast to the standard approach in the literature, we focus on domestic outsourcing as well as foreign outsourcing. By using a simple theoretical model, we argue that, if outsourcing is associated with specialization gains arising from an increase in the extent of the market for intermediate goods, domestic outsourcing tends to increase wages for both unskilled and skilled labor. We use a panel data set of workers in Danish manufacturing industries to show that domestic and foreign outsurcing affect wages as predicted by the theory.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7522
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Publisher Info
Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 19-2005.

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Length: 24 pages
Date of creation: 13 Nov 2006
Date of revision:
Handle: RePEc:hhs:cbsnow:2005_019

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Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 26 65
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Web page: http://www.cbs.dk/departments/econ/
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Related research
Keywords: Outsourcing; Comparative advantage; Specialization; Wages;

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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers 00-08, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  3. Joseph F. Francois & Douglas Nelson, 2002. "A Geometry Of Specialisation," Economic Journal, Royal Economic Society, vol. 112(481), pages 649-678, July. [Downloadable!] (restricted)
    Other versions:
  4. Alastair Hall & Fernanda P. M. Peixe, 2000. "A Consistent Method for the Selection of Relevant Instruments," Econometric Society World Congress 2000 Contributed Papers 0790, Econometric Society. [Downloadable!]
  5. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June. [Downloadable!] (restricted)
  6. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages C166-C185, 03. [Downloadable!] (restricted)
  7. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Duranton, Gilles & Jayet, Hubert, 2005. "Is the Division of Labour Limited By the Extent of the Market? Evidence from French Cities," CEPR Discussion Papers 5087, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May. [Downloadable!] (restricted)
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  14. 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. [Downloadable!] (restricted)
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  15. Per-Anders Edin & Peter Fredriksson & Per Lundborg, 2004. "The effect of trade on earnings--evidence from Swedish micro data," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 231-241, April. [Downloadable!] (restricted)
  16. Eli Berman & John Bound & Stephen Machin, 1998. "Implications Of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1245-1279, November. [Downloadable!] (restricted)
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  17. Ingo Geishecker & Holger Görg, 2008. "Winners and losers: a micro-level analysis of international outsourcing and wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 243-270, February. [Downloadable!] (restricted)
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  18. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Salvador Barrios & Holger Görg & Eric Strobl, 2009. "Spillovers through backward linkages from multinationals: Measurement matters!," Kiel Working Papers 1560, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  2. Erkki Koskela & Panu Poutvaara, 2008. "Flexible Outsourcing and the Impacts of Labour Taxation in European Welfare States," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Erkki Koskela & Jan König, 2008. "Flexible Outsourcing, Profit Sharing and Equilibrium Unemployment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Koskela, Erkki & Poutvaara, Panu, 2008. "Outsourcing and Labor Taxation in Dual Labor Markets," IZA Discussion Papers 3522, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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