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International Fragmentation and Relative Wages in the UK

  • Hijzen, Alexander

    ()

    (OECD)

  • Görg, Holger

    ()

    (Kiel Institute for the World Economy)

  • Hine, Robert C.

    ()

    (University of Nottingham)

This paper re-examines the trade-based explanation of increased wage inequality in developed countries by focusing on international outsourcing. It is the first detailed study to address the effects of outsourcing on labour markets in the UK. In a recent paper, Feenstra and Hanson (1996) estimate the effect of international outsourcing on wage inequality in the US. This paper extends the FH approach by using more detailed definitions of outsourcing and skill. The analysis applies to UK manufacturing over the period 1982-1997. Extending the analysis to the 1990s is considered to be crucial as outsourcing is predominantly a phenomenon of the 1990s. The econometric results suggest that technical change, import penetration and outsourcing all play an important role in explaining UK wage inequality. Outsourcing may account for about half of the increase in domestic wage inequality.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 717.

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Length: 26 pages
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:iza:izadps:dp717
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  1. Stephen Machin & John Van Reenen, 1998. "Technology And Changes In Skill Structure: Evidence From Seven Oecd Countries," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1215-1244, November.
  2. Kohler, Wilhelm, 2001. "A specific-factors view on outsourcing," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 31-53, March.
  3. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers 986, University of California, Davis, Department of Economics.
  4. Lucy Chennells & John Van Reenen, 1999. "Has technology hurt less skilled workers? A survey of the micro-econometric evidence," IFS Working Papers W99/27, Institute for Fiscal Studies.
  5. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Investment, Outsourcing and Relative Wages," NBER Working Papers 5121, National Bureau of Economic Research, Inc.
  6. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
  7. Haskel, Jonathan & Slaughter, Matthew J, 2001. "Trade, Technology and U.K. Wage Inequality," Economic Journal, Royal Economic Society, vol. 111(468), pages 163-87, January.
  8. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports 72, Federal Reserve Bank of New York.
  9. Holger Görg, 2000. "Fragmentation and trade: US inward processing trade in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(3), pages 403-422, 09.
  10. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
  11. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  12. R. E. Baldwin & G. G. Cain, . "Shifts in U.S. Relative Wages: The Role of Trade, Technology, and Factor Endowments," Institute for Research on Poverty Discussion Papers 1132-97, University of Wisconsin Institute for Research on Poverty.
  13. Haskel, Jonathan, 2000. "The Trade and Labour Approaches to Wage Inequality," CEPR Discussion Papers 2476, C.E.P.R. Discussion Papers.
  14. Salvatore Baldone & Fabio Sdogati & Lucia Tajoli, 2001. "Patterns and determinants of international fragmentation of production: Evidence from outward processing trade between the EU and Central Eastern European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 137(1), pages 80-104, March.
  15. David Autor & Lawrence Katz & Alan Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," Working Papers 756, Princeton University, Department of Economics, Industrial Relations Section..
  16. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
  17. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  18. Anderton, Bob & Brenton, Paul, 1999. "Outsourcing and Low-Skilled Workers in the UK," Bulletin of Economic Research, Wiley Blackwell, vol. 51(4), pages 267-85, October.
  19. Hijzen, Alexander, 2003. "Fragmentation, Productivity and Relative Wages in the UK: A General Equilibrium Approach," Royal Economic Society Annual Conference 2003 108, Royal Economic Society.
  20. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
  21. Haskel, Jonathan & Heden, Ylva, 1999. "Computers and the Demand for Skilled Labour: Industry- and Establishment-Level Panel Evidence for the UK," Economic Journal, Royal Economic Society, vol. 109(454), pages C68-79, March.
  22. Ng, Francis & Yeats, Alexander, 1999. "Production sharing in East Asia : who does what for whom, and why?," Policy Research Working Paper Series 2197, The World Bank.
  23. Robert E. Baldwin & Glen G. Cain, 2000. "Shifts In Relative U.S. Wages: The Role Of Trade, Technology, And Factor Endowments," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 580-595, November.
  24. Berman, Eli & Bound, John & Griliches, Zvi, 1994. "Changes in the Demand for Skilled Labor within U.S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 367-97, May.
  25. Matthew J. Slaughter, 1999. "Globalisation and Wages: A Tale of Two Perspectives," The World Economy, Wiley Blackwell, vol. 22(5), pages 609-629, 07.
  26. Egger, Hartmut & Egger, Peter, 2001. "Cross-border sourcing and outward processing in EU manufacturing," The North American Journal of Economics and Finance, Elsevier, vol. 12(3), pages 243-256, November.
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