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Outsourcing, labour productivity and wage inequality in the US: a primal approach

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  • Aekapol Chongvilaivan
  • Jung Hur

Abstract

We investigate the linkages among outsourcing activities, labour productivity and wage inequality for skilled and unskilled labour by employing a primal approach that involves estimating a nested constant elasticity of substitution production function, using six-digit North American Industry Classification System US manufacturing industries from 2002 to 2005. First, we find that general outsourcing and international outsourcing have a skill-biased impact on labour productivity. However, the skill-biased impact of general outsourcing on labour productivity is larger than that of international outsourcing. Second, we find that the wage gap between skilled and unskilled labour, which is defined as their marginal productivity gap, can be better explained by general outsourcing than by international outsourcing. These two results imply that the wage inequality of US manufacturing industries during 2002-2005 was mainly due to the skill-biased labour productivity effect of general outsourcing rather than that of international outsourcing.

Suggested Citation

  • Aekapol Chongvilaivan & Jung Hur, 2011. "Outsourcing, labour productivity and wage inequality in the US: a primal approach," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 487-502.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:4:p:487-502
    DOI: 10.1080/00036840802360302
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    Cited by:

    1. Jingmei Ma & Yibing Ding & Hongyu Jia, 2016. "The Impacts of Japanese and US Outsourcing on Chinese Firms," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 126-137, February.
    2. Kovach, Jeremy J. & Swink, Morgan & Rodriguez, Mauricio, 2023. "A novel measure of firm-level production outsourcing," International Journal of Production Economics, Elsevier, vol. 263(C).

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