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Offshoring, Tasks, and the Skill-Wage Pattern

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Author Info

  • Baumgarten, Daniel

    ()
    (Ruhr Graduate School in Economics)

  • Geishecker, Ingo

    ()
    (University of Göttingen)

  • Görg, Holger

    ()
    (Kiel Institute for the World Economy)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4828.

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Length: 47 pages
Date of creation: Mar 2010
Date of revision:
Publication status: published in: European Economic Review, 2013, 61 (1), 132-152
Handle: RePEc:iza:izadps:dp4828

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Keywords: skills; outsourcing; offshoring; tasks; wages;

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Citations

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Cited by:
  1. Geishecker, Ingo & Görg, Holger, 2011. "Services offshoring and wages: Evidence from micro data," CEPR Discussion Papers 8628, C.E.P.R. Discussion Papers.
  2. Holger Görg & Dennis Görlich, 2012. "Offshoring, Wages and Job Security of Temporary Workers," SOEPpapers on Multidisciplinary Panel Data Research 512, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
  4. Julia Püschel, 2013. "Wage effects of U.S. service offshoring by skills and tasks," FIW Working Paper series 107, FIW.
  5. Franz-Josef Bade & Eckhardt Bode & Eleonora Cutrini, 2012. "Spatial fragmentation of industries by functions," Working Papers 39-2012, Macerata University, Department of Studies on Economic Development (DiSSE), revised Feb 2012.
  6. 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.
  7. Becker, Sascha & Ekholm, Karolina & Muendler, Marc-Andreas, 2009. "Offshoring and the Onshore Composition of Tasks and Skills," Stirling Economics Discussion Papers 2009-18, University of Stirling, Division of Economics.
  8. Nilsson Hakkala, Katariina & Heyman, Fredrik & Sjöholm, Fredrik, 2014. "Multinational firms, acquisitions and job tasks," European Economic Review, Elsevier, vol. 66(C), pages 248-265.
  9. Lurweg, Maren & Uhde, Nicole, 2010. "International trade and individual labour market perspectives: A micro-level analysis of German manufacturing workers," CAWM Discussion Papers 31, Center of Applied Economic Research Münster (CAWM), University of Münster.
  10. repec:cge:warwcg:96 is not listed on IDEAS
  11. 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.
  12. 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.
  13. Hogrefe, Jan, 2013. "Offshoring and relative labor demand from a task perspective," ZEW Discussion Papers 13-067, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  14. Eckhardt Bode & Franz-Josef Bade Bade & Eleonora Cutrini Cutrini, 2011. "Domestic and International Offshoring of Tasks," ERSA conference papers ersa11p1840, European Regional Science Association.

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