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Specialization, Outsourcing and Wages

Author Info

Listed author(s):
  • 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.

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File URL: http://www.econ.ku.dk/english/research/publications/wp/2005/0528.pdf/
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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 05-28.

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Length: 16 pages
Date of creation: Dec 2005
Handle: RePEc:kud:kuiedp:0528
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Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk
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More information through EDIRC

Keywords: Outsourcing; Comparative advantage; Specialization; Wages;

Other versions of this item:

Find related papers by 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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  1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
  2. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 299-322 National Bureau of Economic Research, Inc.
  3. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages 166-185, 03.
  4. Duranton, Gilles & Jayet, Hubert, 2011. "Is the division of labour limited by the extent of the market? Evidence from French cities," Journal of Urban Economics, Elsevier, vol. 69(1), pages 56-71, January.
  5. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers Archive 11375, Iowa State University, Department of Economics.
  6. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  7. 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.
  8. Alastair R. Hall & Fernanda P. M. Peixe, 2003. "A Consistent Method for the Selection of Relevant Instruments," Econometric Reviews, Taylor & Francis Journals, vol. 22(3), pages 269-287, January.
  9. Joseph F. Francois & Douglas Nelson, 2002. "A Geometry Of Specialisation," Economic Journal, Royal Economic Society, vol. 112(481), pages 649-678, July.
  10. Abowd, John M. & Kramarz, Francis, 1999. "The analysis of labor markets using matched employer-employee data," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 40, pages 2629-2710 Elsevier.
  11. Ingo Geishecker & Holger Görg, 2008. "Winners and losers: a micro-level analysis of international outsourcing and wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 243-270, February.
  12. Eli Bekman & John Bound & Stephen Machin, 1998. "Implications of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1245-1279.
  13. Alexander Hijzen & Holger Görg & Robert C. Hine, 2005. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Economic Journal, Royal Economic Society, vol. 115(506), pages 860-878, October.
  14. Per-Anders Edin & Peter Fredriksson & Per Lundborg, 2004. "The effect of trade on earnings--evidence from Swedish micro data," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 231-241, April.
  15. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  16. 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.
  17. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  18. Arndt, Sven W., 1997. "Globalization and the open economy," The North American Journal of Economics and Finance, Elsevier, vol. 8(1), pages 71-79.
  19. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
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