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Outsourcing Policy and Worker Outcomes: Causal Evidence from a Mexican Ban

Author

Listed:
  • Estefan, Alejandro

    (University of Notre Dame)

  • Gerhard, Roberto

    (Secretaría del Trabajo y Previsión Social)

  • Kaboski, Joseph

    (University of Notre Dame, CEPR, NBER)

  • Kondo, Illenin

    (Federal Reserve Bank of Minneapolis)

  • Qian, Wei

    (Haverford College)

Abstract

Using Mexican economic census data from 1994 to 2019, we document a rising trend in domestic outsourcing, particularly among large firms, and a negative association between outsourcing and labor compensation, including profit sharing and social security. We leverage higher-frequency data from a manufacturing panel survey, matched employer-employee data, and a ban on domestic outsourcing in 2021 to show that the ban reduced outsourcing, increased labor's share, and reduced markdowns without raising total labor costs or affecting employment, output, or productivity. We propose a theoretical model in which corporate fiscal incentives drive outsourcing and account for the observed empirical patterns.

Suggested Citation

  • Estefan, Alejandro & Gerhard, Roberto & Kaboski, Joseph & Kondo, Illenin & Qian, Wei, 2026. "Outsourcing Policy and Worker Outcomes: Causal Evidence from a Mexican Ban," IZA Discussion Papers 18566, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18566
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    Keywords

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    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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