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Specialization, Outsourcing and Wages

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  • Jakob Roland Munch

    (Department of Economics, University of Copenhagen)

  • Jan Rose Skaksen

    (Copenhagen Business School)

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 division of labor, 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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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 05-28.

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Length: 16 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:kud:kuiedp:0528

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Keywords: Outsourcing; Comparative advantage; Specialization; Wages;

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  1. 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.
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  15. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 389-405, June.
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  17. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
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  19. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 8(1), pages 71-79.
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