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Does International Outsourcing Depress Union Wages?

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  • Sebastian Braun
  • Juliane Scheffel

Abstract

In this paper, we provide first empirical evidence on the effect of outsourcing on union wages using linked employer-employee data for Germany. We find that low skilled workers experience a decline in the union wage premium when working in industries with high outsourcing intensities. The finding applies to both firm- and sector-level agreements. Hence, outsourcing appears to deteriorate the bargaining position of unions. Outsourcing is not found to have a negative effect on the wages of low skilled employees not covered by collective bargaining agreements. While wages of medium skilled workers are largely unaffected by outsourcing, high skilled workers see their wages rise in industries with a high level of outsourcing. There is no interaction between coverage and outsourcing for these skill groups.

Suggested Citation

  • Sebastian Braun & Juliane Scheffel, 2007. "Does International Outsourcing Depress Union Wages?," SFB 649 Discussion Papers SFB649DP2007-033, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2007-033
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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2007-033.pdf
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    References listed on IDEAS

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    1. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-245, May.
    2. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
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    Citations

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    Cited by:

    1. Scharpf, Fritz W., 2017. "Vom asymmetrischen Euro-Regime in die Transferunion: Und was die deutsche Politik dagegen tun könnte," MPIfG Discussion Paper 17/15, Max Planck Institute for the Study of Societies.
    2. Beissinger, Thomas & Chusseau, Nathalie & Hellier, Joël, 2015. "Offshoring and Labour Market Reforms: Modelling the German Experience," IZA Discussion Papers 8920, Institute for the Study of Labor (IZA).
    3. Erkki Koskela, 2009. "Impacts of Labor Taxation with Perfectly and Imperfectly Competitive Domestic Labor Markets under Flexible Outsourcing," CESifo Working Paper Series 2852, CESifo Group Munich.
    4. Joseph A. Clougherty & Klaus Gugler & Lars Sørgard, 2012. " Cross-Border Mergers and Domestic Wages: Integrating Positive 'Spillover' Effects and Negative 'Bargaining' Effects," Department of Economics Working Papers wuwp136, Vienna University of Economics and Business, Department of Economics.
    5. Beissinger, Thomas & Chusseau, Nathalie & Hellier, Joël, 2016. "Offshoring and labour market reforms in Germany: Assessment and policy implications," Economic Modelling, Elsevier, vol. 53(C), pages 314-333.
    6. Joseph A Clougherty & Klaus Gugler & Lars Sørgard & Florian W Szücs, 2014. "Cross-border mergers and domestic-firm wages: Integrating “spillover effects” and “bargaining effects”," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(4), pages 450-470, May.
    7. Koskela, Erkki & Stenbacka, Rune, 2010. "Equilibrium unemployment with outsourcing and wage solidarity under labour market imperfections," European Economic Review, Elsevier, vol. 54(3), pages 376-392, April.
    8. Thomas Beissinger & Nathalie Chusseau & Joel Hellier, 2014. "Offshoring, employment, labour market reform and inequality: Modelling the German experience," Working Papers 330, ECINEQ, Society for the Study of Economic Inequality.
    9. Koskela, Erkki & Poutvaara, Panu, 2008. "Flexible Outsourcing and the Impacts of Labour Taxation in European Welfare States," IZA Discussion Papers 3699, Institute for the Study of Labor (IZA).
    10. Ranjan, Priya, 2013. "Offshoring, unemployment, and wages: The role of labor market institutions," Journal of International Economics, Elsevier, vol. 89(1), pages 172-186.
    11. Erkki Koskela & Jan König, 2009. "The Role of Profit Sharing in a Dual Labour Market with Flexible Outsourcing," CESifo Working Paper Series 2533, CESifo Group Munich.
    12. Koskela, Erkki, 2009. "Impacts of Labor Taxation with Perfectly and Imperfectly Competitive Domestic Labor Markets under Flexible Outsourcing," IZA Discussion Papers 4544, Institute for the Study of Labor (IZA).
    13. O'Farrell, Rory, 2012. "The effect of international firm mobility on wages and unemployment," Labour Economics, Elsevier, vol. 19(6), pages 931-943.
    14. Chongvilaivan, Aekapol & Hur, Jung & Riyanto, Yohanes E., 2013. "Labor union bargaining and firm organizational structure," Labour Economics, Elsevier, vol. 24(C), pages 116-124.

    More about this item

    Keywords

    Collective Bargaining; International Outsourcing; Union Wages;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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