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Outsourcing and Technological Change

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Author Info
Ann Bartel
Saul Lach
Nachum Sicherman

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Abstract

In this paper we argue that an important source of the recent increase in outsourcing is the computer and information technology revolution, characterized by increased rates of technological change. Our model shows that an increase in the pace of technological change increases outsourcing because it allows firms to use services based on leading edge technologies without incurring the sunk costs of adopting these new technologies. In addition, firms using more IT-intensive technologies face lower outsourcing costs of IT-based services generating a positive correlation between the IT level of the user and its outsourcing share of IT-based services. This implication is verified in the data.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11158.

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Date of creation: Feb 2005
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Handle: RePEc:nbr:nberwo:11158

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Find related papers by JEL classification:
M55 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Contracting Devices
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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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.:
  1. David H. Autor, 2000. "Outsourcing at Will: Unjust Dismissal Doctrine and the Growth of Temporary Help Employment," NBER Working Papers 7557, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Aghion, Philippe & Howitt, Peter & Violante, Giovanni L, 2000. "General Purpose Technology and Within-Group Inequality," CEPR Discussion Papers 2474, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Allen, Steven G, 2001. "Technology and the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 440-83, April. [Downloadable!] (restricted)
    Other versions:
  4. Marcello Estevao & Saul Lach, 1999. "Measuring Temporary Labor Outsourcing in U.S. Manufacturing," NBER Working Papers 7421, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Lach, Saul & Schankerman, Mark, 1989. "Dynamics of R&D and Investment in the Scientific Sector," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 880-904, August. [Downloadable!] (restricted)
  6. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 339-376, February. [Downloadable!] (restricted)
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  7. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  8. George P. Baker & Thomas N. Hubbard, 2003. "Make Versus Buy in Trucking: Asset Ownership, Job Design, and Information," American Economic Review, American Economic Association, vol. 93(3), pages 551-572, June. [Downloadable!]
  9. Welch, F, 1970. "Education in Production," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 35-59, Jan.-Feb.. [Downloadable!] (restricted)
  10. Mariagiovanna Baccara, 2008. "Outsourcing, Information Leakage and Consulting Firms," Working Papers 08-7, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  11. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July. [Downloadable!] (restricted)
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  12. Susan N. Houseman, 2001. "Why employers use flexible staffing arrangements: Evidence from an establishment survey," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(1), pages 149-170, October.
  13. David H. Autor, 2001. "Why Do Temporary Help Firms Provide Free General Skills Training?," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1409-1448, November. [Downloadable!] (restricted)
    Other versions:
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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. Mariagiovanna Baccaraa, 2004. "Outsourcing, Information Leakage and Consulting Firms," Working Papers 04-19, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  2. Baldwin, John R. & Gu, Wulong, 2008. "Impartition et délocalisation au Canada ," Série de documents de recherche sur l'analyse économique (AE) 2008055f, Statistics Canada, Direction des études analytiques. [Downloadable!]
  3. Roberto Antonietti & Giulio Cainelli, 2007. "Production Outsourcing, Organizational Governance and Firm’s Technological Performance: Evidence from Italy," Working Papers 2007.58, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  4. Hempell, Thomas & Zwick, Thomas, 2005. "Technology Use, Organisational Flexibility and Innovation: Evidence for Germany," ZEW Discussion Papers 05-57, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  5. Luigi Benfratello & Tiziano Razzolini & Alessandro Sembenelli, 2009. "Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata," Working Papers 5, University of Torino, Department of Economics and Public Finance "G. Prato". [Downloadable!]
    Other versions:
  6. Roberto Antonietti & Giulio Cainelli, 2007. "Spatial Agglomeration, Technology and Outsourcing of Knowledge Intensive Business Services Empirical Insights from Italy," Working Papers 2007.79, Fondazione Eni Enrico Mattei. [Downloadable!]
  7. Runjuan Liu & Daniel Trefler, 2008. "Much Ado About Nothing: American Jobs and the Rise of Service Outsourcing to China and India," NBER Working Papers 14061, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Dermot, Leahy & Catia , Montagna, 2007. "‘Make-or-Buy’ in International Oligopoly and the Role of Competitive Pressure," MPRA Paper 7468, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  9. Matthew Dey & Susan Houseman & Anne Polivka, 2009. "What Do We Know about Contracting Out in the United States? Evidence from Household and Establishment Surveys," Staff Working Papers 09-157, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  10. Morissette, René & Johnson, Anick, 2007. "Offshoring and Employment in Canada: Some Basic Facts," Analytical Studies Branch Research Paper Series 2007300e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  11. Michael Hübler, 2007. "A Simple Model of Outsourcing with Cournot Competition," Kiel Working Papers 1320, Kiel Institute for the World Economy. [Downloadable!]
  12. Elisabetta Magnani, 2006. "Technological diffusion, the diffusion of skill and the growth of outsourcing in US manufacturing," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 15(7), pages 617-647, October. [Downloadable!] (restricted)
  13. R. Antonietti & D. Antonioli, 2007. "Production offshoring and the skill composition of Italian manufacturing firms A quasi-experimental analysis," Working Papers 594, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
    Other versions:
  14. Danny Leung & Yi Zheng, 2008. "What Affects MFP in the Long-Run? Evidence from Canadian Industries," Working Papers 08-4, Bank of Canada. [Downloadable!]
  15. Beach, Charles M. & Finnie, Ross & Gray, David, 2006. "The Impact of Macroeconomic Conditions on the Instability and Long-Run Inequality of Workers' Earnings in Canada," Analytical Studies Branch Research Paper Series 2006268e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  16. Laura Abramovsky & Rachel Griffith, 2005. "Outsourcing and offshoring of business services: how important is ICT?," IFS Working Papers W05/22, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  17. Dermot Leahy & Catia Montagna, 2008. "Outsourcing Versus Fdi In Oligopoly Equilibrium," Discussion Papers 215, University of Dundee, Economic Studies. [Downloadable!]
  18. Demiroglu, Ufuk, 2006. "Offshoring Of Service Jobs," MPRA Paper 6437, University Library of Munich, Germany. [Downloadable!]
  19. Baldwin, John R. & Gu, Wulong, 2008. "Outsourcing and Offshoring in Canada," Economic Analysis (EA) Research Paper Series 2008055e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
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