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Service offshoring and wages: worker-level evidence from Italy

We study the effects of service offshoring on the wages of Italian workers. To this purpose, we build up a novel data set combining information from two different sources: (1) matched employer-employee data based on administrative records from the Italian National Social Security Institute; and (2) industry-level indicators of service offshoring based on Import Matrices released by the Italian Statistical Office. We estimate worker-level wage regressions controlling for a number of employee, firm and industry characteristics. In line with previous studies, we find that service offshoring does not cause significant reductions in workers’ wages. We also find, however, that service offshoring contributes to widening the wage gap between more and less skilled employees. Finally, we document heterogeneity in the effects of service offshoring depending on the type of activities relocated abroad. Specifically, our results show that offshoring of business services exerts moderately negative effects on workers’ wages, whereas offshoring of other services has virtually no impact on individual earnings.

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Paper provided by Cattaneo University (LIUC) in its series LIUC Papers in Economics with number 264.

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Length: 28 pages
Date of creation: Apr 2013
Date of revision:
Publication status: Published in LIUC papers, no.264, 2013 - Economia e Impresa 69
Handle: RePEc:liu:liucec:264
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  1. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
  2. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2005. "Offshoring in a Knowledge Economy," NBER Working Papers 11094, National Bureau of Economic Research, Inc.
  3. Keith Head & Thierry Mayer & John Ries, 2007. "How Remote is the Offshoring Threat?," Working Papers 2007-18, CEPII research center.
  4. Anna M. Falzoni & Lucia Tajoli, 2011. "Offshoring and the Skill Composition of Employment in the Italian Manufacturing Industries," Rivista di Politica Economica, SIPI Spa, issue 1, pages 121-153, January-M.
  5. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
  6. Alexander Hijzen & Mauro Pisu & Richard Upward & Peter W. Wright, 2011. "Employment, job turnover, and trade in producer services: UK firm-level evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 1020-1043, August.
  7. Rosario Crinò, 2009. "Offshoring, Multinationals And Labour Market: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(2), pages 197-249, 04.
  8. Rosario Crinò, 2009. "Employment Effects of Service Offshoring: Evidence from Matched Firms," UFAE and IAE Working Papers 800.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  9. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
  10. Anna Maria Falzoni & Alessandra Venturini & Claudia Villosio, 2011. "Skilled and unskilled wage dynamics in Italy in the 1990s: changes in individual characteristics, institutions, trade and technology," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(4), pages 441-463.
  11. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
  12. Oecd, 2005. "Potential Offshoring of ICT-intensive Using Occupations," OECD Digital Economy Papers 91, OECD Publishing.
  13. David H. Autor & Frank Levy & Richard J. Murnane, 2001. "The Skill Content of Recent Technological Change: An Empirical Exploration," NBER Working Papers 8337, National Bureau of Economic Research, Inc.
  14. repec:hrv:faseco:4784031 is not listed on IDEAS
  15. Jacob Funk Kirkegaard, 2007. "Offshoring, Outsourcing, and Production Relocation—Labor-Market Effects in the OECD Countries and Developing Asia," Working Paper Series WP07-2, Peterson Institute for International Economics.
  16. David Hummels & Rasmus Jørgensen & Jakob R. Munch & Chong Xiang, 2011. "The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data," NBER Working Papers 17496, National Bureau of Economic Research, Inc.
  17. Rosario Crinò, 2010. "Service Offshoring and White-Collar Employment," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 595-632.
  18. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact of Outsourcing and High-Technology Capital on Wages: Estimates For the United States, 1979–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 907-940.
  19. Peter D. Ørberg Jensen & Jacob Funk Kirkegaard & Nicolai Søndergaard Laugesen, 2006. "Offshoring in Europe—Evidence of a Two-Way Street from Denmark," Working Paper Series WP06-3, Peterson Institute for International Economics.
  20. James Markusen & Bridget Strand, 2008. "Offshoring of Business Services in Small Open Economies: Toward a General-Equilibrium Modeling Approach," Journal of Industry, Competition and Trade, Springer, vol. 8(3), pages 231-246, December.
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