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The Impact of International Outsourcing on the Skill Structure of Employment: Empirical Evidence from German Manufacturing Industries

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  • Markus Diehl
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    Abstract

    In recent publications it has been argued that the change of the skill structure of industrial employment is caused by biased technical progress rather than by increasing international trade with low wage countries. However, in linking prices for final goods with prices of primary factors, most empirical studies have only dealt with international trade in final goods and have thereby neglected the impact of international outsourcing. In this paper it is argued that outsourcing can be understood as a substitution of imported intermediate inputs for domestic value added, and that such substitution may have an impact on the skill structure of domestic employment in favor of skilled labor. The empirical evidence for German manufacturing industries supports this hypothesis.

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    File URL: http://www.ifw-members.ifw-kiel.de/publications/the-impact-of-international-outsourcing-on-the-skill-structure-of-employment-empirical-evidence-from-german-manufacturing-industries/kap946.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 946.

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    Length: 64 pages
    Date of creation: Sep 1999
    Date of revision:
    Handle: RePEc:kie:kieliw:946

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    Related research

    Keywords: International Outsourcing; Trade; Wages; Employment.;

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    References

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    1. Julian R. Betts, 1997. "The Skill Bias Of Technological Change In Canadian Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 146-150, February.
    2. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April.
    3. Robert E. Baldwin & Glen G. Cain, 1997. "Shifts in U.S. Relative Wages: The Role of Trade, Technology and Factor Endowments," NBER Working Papers 5934, National Bureau of Economic Research, Inc.
    4. E. Berman & J. Bound & S. Machin, 1997. "Implications of skill-biased technological change: international evidence," LSE Research Online Documents on Economics 20314, London School of Economics and Political Science, LSE Library.
    5. Jonathan E. Haskel & Matthew J. Slaughter, 1998. "Does the Sector Bias of Skill-Biased Technical Change Explain Changing Wage Inequality?," NBER Working Papers 6565, National Bureau of Economic Research, Inc.
    6. Deardorff, A.V., 1998. "Fragmentation Across Cones," Papers 98-14, Michigan - Center for Research on Economic & Social Theory.
    7. Stephen Machin & A Ryan & John Van Reenen, 1996. "Technology and Changes in Skill Structure: Evidence from an International Panel of Industries," CEP Discussion Papers dp0297, Centre for Economic Performance, LSE.
    8. repec:fth:michin:427 is not listed on IDEAS
    9. Bergstrom, Villy & Panas, Epaminondas E, 1992. "How Robust Is the Capital-Skill Complementarity Hypothesis?," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 540-46, August.
    10. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
    11. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    12. Edward E. Leamer, 1996. "In Search of Stolper-Samuelson Effects on U.S. Wages," NBER Working Papers 5427, National Bureau of Economic Research, Inc.
    13. Klodt, Henning, 1997. "The transition to the service society: prospects for growth, productivity and employment," Kiel Working Papers 839, Kiel Institute for the World Economy.
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    Citations

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    Cited by:
    1. Robert Anderton & Paul Brenton & Eva Oscarsson, 2002. "What’s trade got to do with it? Relative demand for skills within Swedish manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(4), pages 629-651, December.
    2. Lorentowicz, Andzelika & Marin, Dalia & Raubold, Alexander, 2005. "Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland," Discussion Papers in Economics 715, University of Munich, Department of Economics.
    3. Koskela, Erkki & Stenbacka, Rune, 2007. "Equilibrium Unemployment with Outsourcing and Wage Solidarity Under Labour Market Imperfections," IZA Discussion Papers 2733, Institute for the Study of Labor (IZA).
    4. Lars Calmfors & Giancarlo Corsetti & Michael P. Devereux & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2008. "Chapter 3: The effect of globalisation on Western European jobs: curse or blessing?," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 71-104, 02.
    5. Erkki Koskela & Panu Poutvaara, 2008. "Flexible Outsourcing and the Impacts of Labour Taxation in European Welfare States," CESifo Working Paper Series 2440, CESifo Group Munich.
    6. 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.
    7. Jörn Kleinert, 2003. "Growing Trade in Intermediate Goods: Outsourcing, Global Sourcing, or Increasing Importance of MNE Networks?," Review of International Economics, Wiley Blackwell, vol. 11(3), pages 464-482, 08.
    8. Markus Diehl, 2001. "International Trade in Intermediate Inputs: The Case of the Automobile Industry," Kiel Working Papers 1027, Kiel Institute for the World Economy.
    9. Koskela, Erkki & Stenbacka, Rune, 2010. "Equilibrium unemployment with outsourcing and wage solidarity under labour market imperfections," European Economic Review, Elsevier, vol. 54(3), pages 376-392, April.
    10. Katja Gerling, 2000. "Subsidization and Structural Change in Eastern German Transition: Did Economic Policy Meet Its Objectives?," Kiel Working Papers 998, Kiel Institute for the World Economy.
    11. Erkki Koskela & Rune Stenbacka, 2007. "Equilibrium Unemployment with Outsourcing and Wage Solidarity under Labour Market Imperfections," CESifo Working Paper Series 1988, CESifo Group Munich.

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