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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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    1. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2020. "Wage response to global production links: evidence for workers from 28 European countries (2005–2014)," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 769-801, November.
    2. Matilde Cardoso & Pedro Cunha Neves & Oscar Afonso & Elena Sochirca, 0. "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. 0, pages 1-31.
    3. Aksoy, Cevat Giray & Özcan, Berkay & Philipp, Julia, 2021. "Robots and the gender pay gap in Europe," European Economic Review, Elsevier, vol. 134(C).
    4. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 0. "Wage response to global production links: evidence for workers from 28 European countries (2005–2014)," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 0, pages 1-33.
    5. 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).
    6. 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.
    7. 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.

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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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