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Specialization, Outsourcing and Wages

Author

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  • Jakob Roland Munch

    (Department of Economics, University of Copenhagen)

  • Jan Rose Skaksen

    (Copenhagen Business School)

Abstract

This paper studies the impact of outsourcing on individual wages. In contrast to the standard approach in the literature, we focus on domestic outsourcing as well as foreign outsourcing. By using a simple theoretical model, we argue that, if outsourcing is associated with specialization gains arising from an increase in the division of labor, domestic outsourcing tends to increase wages for both unskilled and skilled labor. We use a panel data set of workers in Danish manufacturing industries to show that domestic and foreign outsurcing affect wages as predicted by the theory.

Suggested Citation

  • Jakob Roland Munch & Jan Rose Skaksen, 2005. "Specialization, Outsourcing and Wages," Discussion Papers 05-28, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:0528
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    References listed on IDEAS

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    More about this item

    Keywords

    Outsourcing; Comparative advantage; Specialization; Wages;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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