Offshoring, Tasks, and the Skill-Wage Pattern

48 Pages Posted: 29 Mar 2010

See all articles by Daniel Baumgarten

Daniel Baumgarten

Ruhr Graduate School in Economics; Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Ingo Geishecker

Georg-August-University Göttingen

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Multiple version iconThere are 4 versions of this paper

Date Written: March 2010

Abstract

The paper investigates the relationship between offshoring, wages, and the ease with which individuals' tasks can be offshored. Our analysis relates to recent theoretical contributions arguing that there is only a loose relationship between the suitability of a task for offshoring and the associated skill level. Accordingly, wage effects of offshoring can be very heterogeneous within skill groups. We test this hypothesis by combining micro-level information on wages and demographic and workplace characteristics as well as occupational information relating to the degree of offshorability with industry-level data on offshoring. Our main results suggest that in partial equilibrium, wage effects of offshoring are fairly modest but far from homogeneous and depend significantly on the extent to which the respective task requires personal interaction or can be described as non-routine. When allowing for cross-industry movement of workers, i.e., looking at a situation closer to general equilibrium, the magnitude of the wage effects of offshoring becomes substantial. Low- and medium-skilled workers experience significant wage cuts due to offshoring which, however, again strongly depend on the degree of personal interaction and non-routine content.

Keywords: offshoring, outsourcing, skills, tasks, wages

JEL Classification: F1, F2, J3

Suggested Citation

Baumgarten, Daniel and Geishecker, Ingo and Gorg, Holger, Offshoring, Tasks, and the Skill-Wage Pattern (March 2010). CEPR Discussion Paper No. DP7756. Available at SSRN: https://ssrn.com/abstract=1578106

Daniel Baumgarten (Contact Author)

Ruhr Graduate School in Economics ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany
+492018149510 (Phone)
+492018149500 (Fax)

HOME PAGE: http://www.rgs.econ.org/

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany
+492018149510 (Phone)
+492018149500 (Fax)

HOME PAGE: http://www.rwi-essen.de/

Ingo Geishecker

Georg-August-University Göttingen ( email )

Platz der Göttinger Sieben 3
Goettingen, 37073
Germany

Holger Gorg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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