International Outsourcing and Wage Rigidity: A Formal Approach and First Empirical Evidence

28 Pages Posted: 26 Mar 2009

See all articles by Daniel Horgos

Daniel Horgos

University of the German Federal Armed Forces - Department of Economics

Date Written: March 23, 2009

Abstract

International Outsourcing effects on labor markets are mostly analyzed within flexible wage settings. Using a modern duality approach, this paper formally investigates differences occurring in industries with low skilled wage rigidity and, for the first time in literature, presents empirical evidence supporting the theoretical findings. Using a logit model to analyze microeconomic German panel data, results show that International Outsourcing significantly increases low skilled unemployment when taking place in industries characterized by low skilled wage rigidity. Thus, in terms of unemployment, not International Outsourcing but inflexible labor market institutions instead should be blamed for harming low skilled labor.

Keywords: International Outsourcing, wage rigidity, unemployment

JEL Classification: F12, J64, F41

Suggested Citation

Horgos, Daniel, International Outsourcing and Wage Rigidity: A Formal Approach and First Empirical Evidence (March 23, 2009). SOEPpaper No. 166. Available at SSRN: https://ssrn.com/abstract=1367372 or http://dx.doi.org/10.2139/ssrn.1367372

Daniel Horgos (Contact Author)

University of the German Federal Armed Forces - Department of Economics ( email )

Holstenhofweg 85
Hamburg, 22043
Germany

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