Winners and Losers: Fragmentation, Trade and Wages Revisited
Free University of Berlin (FUB) - Department of Business and Economics
Kiel Institute for the World Economy; Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 982
Our paper investigates the link between outsourcing and wages utilising a large household panel and combining it with industry level information on industries' outsourcing activities from input-output tables. By doing so we can arguably overcome the potential endogeneity bias as well as other shortcomings that affect industry level studies. We find that fragmentation has had a marked impact on wages. Distinguishing three skill categories we find evidence that outsourcing reduced the real wage for workers in the lowest skill categories; this result is robust to a number of different specifications and definitions of outsourcing. Furthermore we find some evidence that high-skilled workers experienced increased wages due to fragmentation.
Number of Pages in PDF File: 30
Keywords: outsourcing, fragmentation, skills, wages, trade
JEL Classification: F16, L24, J31working papers series
Date posted: February 11, 2004
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