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Winners and Losers: Fragmentation, Trade and Wages Revisited

Author

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  • Geishecker, Ingo

    (University of Göttingen)

  • Görg, Holger

    (Kiel Institute for the World Economy)

Abstract

Our paper investigates the link between outsourcing and wages utilising a large household panel and combining it with industry level information on industries’ outsourcing activities from input-output tables. By doing so we can arguably overcome the potential endogeneity bias as well as other shortcomings that affect industry level studies. We find that fragmentation has had a marked impact on wages. Distinguishing three skill categories we find evidence that outsourcing reduced the real wage for workers in the lowest skill categories; this result is robust to a number of different specifications and definitions of outsourcing. Furthermore we find some evidence that high-skilled workers experienced increased wages due to fragmentation.

Suggested Citation

  • Geishecker, Ingo & Görg, Holger, 2004. "Winners and Losers: Fragmentation, Trade and Wages Revisited," IZA Discussion Papers 982, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp982
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    References listed on IDEAS

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    Cited by:

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    2. Michael Landesmann & Robert Stehrer, 2009. "South-North Integration, Outsourcing and Skills," wiiw Research Reports 353, The Vienna Institute for International Economic Studies, wiiw.
    3. Ogloblin, C, 2004. "Global Outsourcing of Human Capital and the Incidence of Unemployment in the United States," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(3).
    4. Giuseppe Tattara, 2006. "Emerging Hubs in Central-Eastern Europe, Trade Blocs and Supply Chain Restructuring," Working Papers 2006_57, Department of Economics, University of Venice "Ca' Foscari".
    5. Geishecker, Ingo & Gorg, Holger, 2005. "Do unskilled workers always lose from fragmentation?," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 81-92, March.
    6. Chiara BROCCOLINI & Alessia LO TURCO & Andrea PRESBITERO & Stefano STAFFOLANI, 2007. "International Outsourcing vs. ICT in explaining the wage gap in Italian Manufacturing," Working Papers 299, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    7. Eva Katalin Polgar & Julia Woerz, 2011. "Trade With Central and Eastern Europe: Is It Really a Threat to Wages in the West?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-31, March.

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    Keywords

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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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