IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v86y1996i2p240-45.html
   My bibliography  Save this article

Globalization, Outsourcing, and Wage Inequality

Author

Listed:
  • Feenstra, Robert C
  • Hanson, Gordon H

Abstract

There is considerable debate over whether international trade has contributed to the declining economic fortunes of less skilled workers. One issue that has become lost in the current discussion is how firms respond to import competition and how these responses, in turn, are transmitted to the labor market. In previous work, we have argued that outsourcing, by which we mean the import of intermediate inputs by domestic firms, has contributed to an increase in the relative demand for skilled labor in the United States. If firms respond to import competition from low-wage countries by moving non- skill-intensive activities abroad, then trade will shift employment towards skilled workers within industries. In this paper, we extend our previous work by combining new import data from the revised NBER trade database with disaggregated data on input purchases from the Census of Manufactures. We construct industry-by-industry estimates of outsourcing for the period 1972-1990 and reexamine whether outsourcing has contributed to an increase in relative demand for skilled labor. Our main finding is that outsourcing can account for 31-51% of the increase in the relative demand for skilled labor that occurred in U.S. manufacturing industries during the 1980s, compared to our previous estimate of 15-33%.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-245, May.
  • Handle: RePEc:aea:aecrev:v:86:y:1996:i:2:p:240-45
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0002-8282%28199605%2986%3A2%3C240%3AGOAWI%3E2.0.CO%3B2-B&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers 95-14, California Davis - Institute of Governmental Affairs.
    2. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 367-397.
    3. Matthew J. Slaughter, 1995. "Multinational Corporations, Outsourcing, and American Wage Divergence," NBER Working Papers 5253, National Bureau of Economic Research, Inc.
    4. Robert Z Lawrence, 1994. "Trade, Multinationals and Labour," RBA Annual Conference Volume (Discontinued), in: Philip Lowe & Jacqueline Dwyer (ed.),International Intergration of the Australian Economy, Reserve Bank of Australia.
    5. J. David Richardson, 1995. "Income Inequality and Trade: How to Think, What to Conclude," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 33-55, Summer.
    6. Nickell, Stephen & Nicolitsas, D., 1994. "Wages," LSE Research Online Documents on Economics 51644, London School of Economics and Political Science, LSE Library.
    7. Baldwin, Robert E & Hilton, R Spence, 1984. "A Technique for Indicating Comparative Costs and Predicting Changes in Trade Ratios," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 105-110, February.
    8. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, November.
    9. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    2. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
    3. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
    4. Johnson, Joanne & Baldwin, John R. & Gray, Tara, 1996. "Avantages salariaux d'origine technologique dans les etablissements canadiens de fabrication pendant les annees 1980," Direction des études analytiques : documents de recherche 1996092f, Statistics Canada, Direction des études analytiques.
    5. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    6. Johnson, Joanne & Baldwin, John R. & Gray, Tara, 1996. "Technology-induced Wage Premia in Canadian Manufacturing Plants During the 1980s," Analytical Studies Branch Research Paper Series 1996092e, Statistics Canada, Analytical Studies Branch.
    7. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    8. Fajnzylber, Pablo & Maloney, William F., 2005. "Labor demand and trade reform in Latin America," Journal of International Economics, Elsevier, vol. 66(2), pages 423-446, July.
    9. Robert C. Feenstra, 2017. "Statistics to Measure Offshoring and its Impact," NBER Working Papers 23067, National Bureau of Economic Research, Inc.
    10. Joseph Francois & Douglas R. Nelson, 2000. "Victims of Progress: Economic Integration, Specialization, and Wages for Unskilled Labor," Tinbergen Institute Discussion Papers 00-065/2, Tinbergen Institute.
    11. J.E. Haskel & M.J. Slaughter, 1998. "Does the Sector Bias of Skill-Biased Technical Change Explain Changing Wage Inequality?," Working Papers 386, Queen Mary University of London, School of Economics and Finance.
    12. Steven Saeger, 1997. "Globalization and deindustrialization: Myth and reality in the OECD," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(4), pages 579-608, December.
    13. 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.
    14. Chiquiar, Daniel, 2008. "Globalization, regional wage differentials and the Stolper-Samuelson Theorem: Evidence from Mexico," Journal of International Economics, Elsevier, vol. 74(1), pages 70-93, January.
    15. Matthew J. Slaughter, 1998. "What Are the Results of Product-Price Studies and What Can We Learn From Their Differences?," NBER Working Papers 6591, National Bureau of Economic Research, Inc.
    16. Catherine L. Mann, 1997. "Globalization and Productivity in the United States and Germany," Working Paper Series Working Paper Special (1), Peterson Institute for International Economics.
    17. Susan Chun Zhu & Daniel Trefler, 2001. "Ginis in General Equilibrium: Trade, Technology and Southern Inequality," NBER Working Papers 8446, National Bureau of Economic Research, Inc.
    18. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    19. Paul Segerstrom & Elias Dinopoulos, 1999. "A Schumpeterian Model of Protection and Relative Wages," American Economic Review, American Economic Association, vol. 89(3), pages 450-472, June.
    20. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.

    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:86:y:1996:i:2:p:240-45. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.