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Integrated sectors - diversified earnings: the (missing) impact of offshoring on wages and wage convergence in the EU27

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  • Aleksandra Parteka
  • Joanna Wolszczak-Derlacz

Abstract

This paper assesses the impact of international outsourcing/offshoring practices on the process of wage equalization across manufacturing sectors in a sample of EU27 economies (1995–2009). We discriminate between heterogeneous wage effects on different skill categories of workers (low, medium and high skill). The main focus is on the labour market outcomes of vertical integration, so we augment a model of conditional wage convergence through the inclusion of sector-specific broad and narrow outsourcing/offshoring indices based on input-output data (World Input Output Database, April 2012 release). Two-way relations between trade and wages are addressed through the use of a gravity-based sector-level instrument. We find no evidence supporting unconditional skill-specific wage convergence in EU sectors. In a conditional setting, (slow) wage convergence takes place, but international outsourcing plays a negligible role in wage equalization. Moreover, even though regression results indicate that offshoring reduces the wage growth of domestic medium- and low-skilled workers, we show that this negative effect is economically small. Copyright The Author(s) 2015

Suggested Citation

  • Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2015. "Integrated sectors - diversified earnings: the (missing) impact of offshoring on wages and wage convergence in the EU27," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(3), pages 325-350, September.
    • Handle: RePEc:kap:jecinq:v:13:y:2015:i:3:p:325-350
    DOI: 10.1007/s10888-014-9290-y
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    Cited by:

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    5. Dagmara Nikulin & Joanna Wolszczak-Derlacz, 2023. "Working Conditions in the Context of Global Value Chains and Routinisation: An Example of Polish Workers," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 1-12.
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    8. Gravina, Antonio Francesco & Foster-McGregor, Neil, 2020. "Automation, globalisation and relative wages: An empirical analysis of winners and losers," MERIT Working Papers 2020-040, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2017. "Workers, Firms and Task Heterogeneity in International Trade Analysis: An Example of Wage Effects of Trade Within GVC," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 5(2), pages 9-25.
    10. Matilde Cardoso & Pedro Cunha Neves & Oscar Afonso & Elena Sochirca, 2021. "The effects of offshoring on wages: a meta-analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(1), pages 149-179, February.
    11. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2019. "Global Value Chains and Wages: Multi-Country Evidence from Linked Worker-Industry Data," Open Economies Review, Springer, vol. 30(3), pages 505-539, July.
    12. Joanna Wolszczak-Derlacz & Aleksandra Parteka, 2018. "The effects of offshoring to low-wage countries on domestic wages: a worldwide industrial analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(1), pages 129-163, February.

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    More about this item

    Keywords

    Wage; Convergence; International outsourcing; Offshoring; Input-output;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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