Winners and Losers: A Micro-Level Analysis of International Outsourcing and Wages
Free University of Berlin (FUB) - Department of Business and Economics
Kiel Institute for the World Economy; Institute for the Study of Labor (IZA)
Canadian Journal of Economics/Revue canadienne d'économique, Vol. 41, Issue 1, pp. 243-270, February/février 2008
Our paper investigates the link between international outsourcing and wages utilizing a large household panel and combining it with industry-level information on industries' outsourcing activities from input-output tables. This approach avoids problems such as aggregation bias, potential endogeneity bias, and poor skill definitions that commonly hamper industry-level studies. We find that outsourcing has had a marked impact on wages. Applying two alternative skill classifications, we find evidence that a 1 percentage point increase in outsourcing reduced the wage for workers in the lowest skill categories by up to 1.5%, while it increased wages for high-skilled workers by up to 2.6%. This result is robust to a number of different specifications.
Number of Pages in PDF File: 28Accepted Paper Series
Date posted: January 11, 2008
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