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Labor market effects of bounds on domestic outsourcing

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  • Jiménez, Bruno
  • Rendon, Silvio

Abstract

In early 2022, Peru enacted regulations to curtail widespread outsourcing, limiting it to activities outside a firm’s core functions. Utilizing quarterly data from Peru’s National Household Surveys (ENAHO) from 2021 to 2022 and yearly data from 2023, this study applies difference-in-differences techniques to assess short-term labor market outcomes. Results show that while outsourcing decreased by 1.7 percentage points, the restrictions had no significant adverse effects on employment, wages, or labor formalization. If anything, employment and labor force participation showed slight, though non-causal, increases. These findings are robust to various tests and alternative specifications, suggesting that the policy primarily impacted outsourcing practices without markedly influencing broader labor outcomes. It did neither destroy jobs nor improve workers’ employment conditions.

Suggested Citation

  • Jiménez, Bruno & Rendon, Silvio, 2025. "Labor market effects of bounds on domestic outsourcing," Journal of Development Economics, Elsevier, vol. 173(C).
    • Handle: RePEc:eee:deveco:v:173:y:2025:i:c:s030438782400155x
    DOI: 10.1016/j.jdeveco.2024.103406
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    1. Deborah Goldschmidt & Johannes F. Schmieder, 2017. "The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(3), pages 1165-1217.
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    4. Adrien Bilal & Hugo Lhuillier, 2021. "Outsourcing, Inequality and Aggregate Output," NBER Working Papers 29348, National Bureau of Economic Research, Inc.
    5. Adrien Bilal & Hugo Lhuillier, 2021. "Outsourcing, Inequality and Aggregate Output," Working Papers 2021-05, Becker Friedman Institute for Research In Economics.
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    More about this item

    Keywords

    Domestic outsourcing; Employment;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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