IDEAS home Printed from https://ideas.repec.org/a/bla/worlde/v29y2006i5p559-583.html
   My bibliography  Save this article

Does Outsourcing to Central and Eastern Europe Really Threaten Manual Workers’ Jobs in Germany?

Author

Listed:
  • Ingo Geishecker

Abstract

Starting from the observation of significant within‐industry skill‐upgrading, this paper analyses how international outsourcing has affected the relative demand for manual workers in German manufacturing during the 1990s. We combine trade and input‐output data to disentangle international outsourcing and trade in final goods and differentiate between the effects of narrowly and broadly defined outsourcing towards Central and Eastern Europe (CEEC), the European Union (EU15) and the rest of the world. Accounting for the endogeneity of international outsourcing by applying instrumental variable techniques, the empirical analysis showed that international outsourcing is indeed an important explanatory factor for the observed decline in relative demand for manual workers in German manufacturing. Particularly, outsourcing towards CEEC plays a major role, irrespective of whether a narrow or wide measure of outsourcing is applied. Using a narrow outsourcing measure and controlling for the adverse demand effects of skill‐biased technological change, time‐changing industry characteristics, wages as well as industry unobserved characteristics, international outsourcing towards CEEC is found to have lowered the manual workers’ wage bill share by 2.7 per‐centage points between 1991 and 2000. In its magnitude this effect is comparable to the skill‐biased effect of technological progress, as captured by our controls. Outsourcing towards countries outside CEEC and outside the EU15 is found to have small negative effects on the relative demand for manual workers, but only if one follows the broad definition of international outsourcing. Outsourcing towards the EU15 is, however, always found to be insignificant.

Suggested Citation

  • Ingo Geishecker, 2006. "Does Outsourcing to Central and Eastern Europe Really Threaten Manual Workers’ Jobs in Germany?," The World Economy, Wiley Blackwell, vol. 29(5), pages 559-583, May.
    • Handle: RePEc:bla:worlde:v:29:y:2006:i:5:p:559-583
    DOI: 10.1111/j.1467-9701.2006.00800.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9701.2006.00800.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9701.2006.00800.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sascha O. Becker & Karolina Ekholm & Robert Jäckle & Marc-Andreas Muendler, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(4), pages 693-731, December.
    2. Robert C. Feenstra & Gene M. Grossman & Douglas A. Irwin (ed.), 1996. "The Political Economy of Trade Policy: Papers in Honor of Jagdish Bhagwati," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061864, April.
    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. Ronald Bachmann & Daniel Baumgarten & Joel Stiebale, 2014. "Foreign direct investment, heterogeneous workers and employment security: Evidence from Germany," Canadian Journal of Economics, Canadian Economics Association, vol. 47(3), pages 720-757, August.
    2. Becker, Sascha O. & Ekholm, Karolina & Muendler, Marc-Andreas, 2013. "Offshoring and the onshore composition of tasks and skills," Journal of International Economics, Elsevier, vol. 90(1), pages 91-106.
    3. Hübler, Michael, 2007. "A simple model of outsourcing with Cournot competition," Kiel Working Papers 1320, Kiel Institute for the World Economy (IfW Kiel).
    4. repec:zbw:rwirep:0268 is not listed on IDEAS
    5. Ellingsen, Gaute & Likumahuwa, Winfried & Nunnenkamp, Peter, 2006. "Outward FDI by Singapore: a different animal?," Open Access Publications from Kiel Institute for the World Economy 3947, Kiel Institute for the World Economy (IfW Kiel).
    6. Bachmann, Ronald & Baumgarten, Daniel & Stiebale, Joel, 2011. "Cross-border Investment, Heterogeneous Workers, and Employment Security – Evidence from Germany," Ruhr Economic Papers 268, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    7. Ronald Bachmann & Daniel Baumgarten & Joel Stiebale, 2011. "Cross-border Investment, Heterogeneous Workers, and Employment Security – Evidence from Germany," Ruhr Economic Papers 0268, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    8. Paolo Epifani & Gino Gancia, 2008. "The Skill Bias of World Trade," Economic Journal, Royal Economic Society, vol. 118(530), pages 927-960, July.
    9. M. Magnani, 2009. "Labor share dynamics: a survey of the theory," Economics Department Working Papers 2009-EP07, Department of Economics, Parma University (Italy).
    10. Markus Brueckner & Ngo Van Long & Joaquin L. Vespignani, 2020. "Non-Gravity Trade," Globalization Institute Working Papers 388, Federal Reserve Bank of Dallas.
    11. Olarreaga, Marcelo, 1999. "Foreign-owned Capital and Endogenous Tariffs," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 606-624.
    12. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2015. "Offshoring and Directed Technical Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(3), pages 84-122, July.
    13. 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.
    14. repec:wsr:ecbook:2008:i:i-016 is not listed on IDEAS
    15. Hitoshi Tanaka & Tatsuro Iwaisako, 2009. "Product cycles, endogenous skill acquisition, and wage inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 300-331, February.
    16. repec:spo:wpecon:info:hdl:2441/10184 is not listed on IDEAS
    17. Thierry Mayer, 2006. "Policy Coherence for Development: A Background Paper on Foreign Direct Investment," OECD Development Centre Working Papers 253, OECD Publishing.
    18. Ann Harrison & John McLaren & Margaret S. McMillan, 2010. "Recent Findings on Trade and Inequality," NBER Working Papers 16425, National Bureau of Economic Research, Inc.
    19. Elhanan Helpman & Oleg Itskhoki & Marc-Andreas Muendler & Stephen J. Redding, 2017. "Trade and Inequality: From Theory to Estimation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 357-405.
    20. Ying Ge & Tony Fang & Yeheng Jiang, 2019. "Access to imported intermediates and intra‐firm wage inequality," The World Economy, Wiley Blackwell, vol. 42(8), pages 2364-2384, August.
    21. Lee, In Hyeock (Ian) & Hong, Eunsuk & Makino, Shige, 2020. "The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)," International Business Review, Elsevier, vol. 29(3).
    22. Maritza Sotomayor, 2016. "Vertical Specialization of Production: Critical Review and Empirical Evidence for the Mexican Manufacturing Industries 1994-2014," International Journal of Business and Social Research, LAR Center Press, vol. 6(2), pages 11-28, February.
    23. Sugata Marjit & Rashmi Ahuja & Abhilasha Pandey, 2021. "Education, Lack of Complementary Investment and Underemployment In an Open Economy," CESifo Working Paper Series 9278, CESifo.

    More about this item

    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:bla:worlde:v:29:y:2006:i:5:p:559-583. See general information about how to correct material in RePEc.

    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: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.