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Worker- and Firm-Level Effects of an Outsourcing Ban

Author

Listed:
  • Cigdem Ekiz

    (UNU-MERIT, Maastricht University , UNU-MERIT, Maastricht, the Netherlands)

  • Eren Gurer

    (Department of Economics, Middle East Technical University, Ankara, Turkiye)

  • Erol Taymaz

    (Department of Economics, Middle East Technical University, Ankara, Turkiye)

Abstract

We examine how innovation shapes firm-level workforce dynamics using rich administrative data from Türkiye, a developing economy characterized by medium-technology, incremental innovation. We find that patent-based innovation increases both firm size and average daily wages, with the largest employment gains among workers earning just above the median wage. To uncover the mechanisms behind these outcomes, we construct worker transition matrices. Relative to comparable non-innovative firms, innovative firms (i) retain incumbent workers at higher rates, particularly at the top of the wage distribution, (ii) promote retained workers into higher wage bins more frequently, and (iii) hire more new workers, disproportionately into higher wage bins. Finally, occupational composition analysis shows that employment growth is concentrated among technical and production occupations, consistent with the medium-technology, incremental nature of innovation in our sample.

Suggested Citation

  • Cigdem Ekiz & Eren Gurer & Erol Taymaz, 2026. "Worker- and Firm-Level Effects of an Outsourcing Ban," ERC Working Papers 2604, ERC - Economic Research Center, Middle East Technical University, revised Sep 2026.
    • Handle: RePEc:met:wpaper:2604
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    File URL: https://erc.metu.edu.tr/sites/erc.metu.edu.tr/files/menu/series26/2604.pdf
    File Function: First version, 2026
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    More about this item

    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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