How Offshoring Can Affect the Industries' Skill Composition

Abstract

While most offshoring literature focus on the effects on relative wages, other implications do not receive the necessary attention. This paper investigates effects on the industries’ skill ratio. It summarizes the empirical literature, discusses theoretical findings, and provides first empirical evidence for Germany. As results show, effects are mainly driven by the industry where offshoring takes place. In high skill intensive industries, the high skill labor ratio increases (vice versa for low skill intensive industries). Since this result is inline with other empirical findings but seems to contradict with theory, the paper additionally discusses possible explanations.

Keywords: offshoring, labor market implications, skill ratio, skill composition

JEL Classification: F16, J21