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The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data

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  • David Hummels
  • Rasmus Jørgensen
  • Jakob R. Munch
  • Chong Xiang

Abstract

We estimate how offshoring and exporting affect wages by skill type. Our data match the population of Danish workers to the universe of private-sector Danish firms, whose trade flows are broken down by product and origin and destination countries. Our data reveal new stylized facts about offshoring activities at the firm level, and allow us to both condition our identification on within-job-spell changes and construct instruments for offshoring and exporting that are time varying and uncorrelated with the wage setting of the firm. We find that within job spells, (1) offshoring tends to increase the high-skilled wage and decrease the low-skilled wage; (2) exporting tends to increase the wages of all skill types; (3) the net wage effect of trade varies substantially across workers of the same skill type; and (4) conditional on skill, the wage effect of offshoring exhibits additional variation depending on task characteristics. We then track the outcomes for workers after a job spell and find that those displaced from offshoring firms suffer greater earnings losses than other displaced workers, and that low-skilled workers suffer greater and more persistent earnings losses than high-skilled workers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17496.

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Date of creation: Oct 2011
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Publication status: published as David Hummels & Rasmus J?rgensen & Jakob Munch & Chong Xiang, 2014. "The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data," American Economic Review, American Economic Association, vol. 104(6), pages 1597-1629, June.
Handle: RePEc:nbr:nberwo:17496

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  1. Ebenstein, Avraham & Harrison, Ann & McMillan, Margaret & Phillips, Shannon, 2011. "Estimating the impact of trade and offshoring on American workers using the current population surveys," Policy Research Working Paper Series, The World Bank 5750, The World Bank.
  2. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, Elsevier, vol. 87(1), pages 106-118, August.
  3. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, Elsevier, vol. 54(1), pages 75-96, June.
  4. Gianmarco I.P. Ottaviano & Giovanni Peri & Greg C. Wright, 2010. "Immigration, Offshoring and American Jobs," NBER Working Papers, National Bureau of Economic Research, Inc 16439, National Bureau of Economic Research, Inc.
  5. Munch, Jakob Roland & Skaksen, Jan Rose, 2008. "Human capital and wages in exporting firms," Journal of International Economics, Elsevier, Elsevier, vol. 75(2), pages 363-372, July.
  6. Elhanan Helpman & Oleg Itshoki & Stephen Redding, 2009. "Inequality and unemployment in a global economy," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 25501, London School of Economics and Political Science, LSE Library.
  7. Harrison, Ann & McLaren, John & McMillan, Margaret S., 2010. "Recent findings on trade and inequality:," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 1047, International Food Policy Research Institute (IFPRI).
  8. Martins, Pedro S. & Opromolla, Luca David, 2009. "Exports, Imports and Wages: Evidence from Matched Firm-Worker-Product Panels," IZA Discussion Papers, Institute for the Study of Labor (IZA) 4646, Institute for the Study of Labor (IZA).
  9. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2006. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 28, University of Lüneburg, Institute of Economics.
  10. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 125(4), pages 1727-1767, November.
  11. Naércio Aquino Menezes Filho & Marc-Andreas Muendler, 2007. "Labor Reallocation in Response to Trade Reform," CESifo Working Paper Series, CESifo Group Munich 1936, CESifo Group Munich.
  12. Avraham Ebenstein & Ann Harrison & Margaret McMillan & Shannon Phillips, 2009. "Why are American Workers getting Poorer? Estimating the Impact of Trade and Offshoring Using the CPS," NBER Working Papers, National Bureau of Economic Research, Inc 15107, National Bureau of Economic Research, Inc.
  13. Ariel Burstein & Jonathan Vogel, 2010. "Globalization, Technology, and the Skill Premium: A Quantitative Analysis," NBER Working Papers, National Bureau of Economic Research, Inc 16459, National Bureau of Economic Research, Inc.
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