Outsourcing and Technological Change

39 Pages Posted: 29 Mar 2005 Last revised: 20 Feb 2015

See all articles by Ann P. Bartel

Ann P. Bartel

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Saul Lach

Hebrew University of Jerusalem - Department of Economics; CEPR

Nachum Sicherman

Columbia University; IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: February 2005

Abstract

In this paper we argue that an important source of the recent increase in outsourcing is the computer and information technology revolution, characterized by increased rates of technological change. Our model shows that an increase in the pace of technological change increases outsourcing because it allows firms to use services based on leading edge technologies without incurring the sunk costs of adopting these new technologies. In addition, firms using more IT-intensive technologies face lower outsourcing costs of IT-based services generating a positive correlation between the IT level of the user and its outsourcing share of IT-based services. This implication is verified in the data.

Suggested Citation

Bartel, Ann P. and Lach, Saul and Sicherman, Nachum, Outsourcing and Technological Change (February 2005). NBER Working Paper No. w11158. Available at SSRN: https://ssrn.com/abstract=673245

Ann P. Bartel (Contact Author)

Columbia Business School - Finance and Economics ( email )

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National Bureau of Economic Research (NBER)

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Saul Lach

Hebrew University of Jerusalem - Department of Economics ( email )

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+972 2 581 6071 (Fax)

HOME PAGE: http://economics.huji.ac.il/facultye/saul/saul.html

CEPR

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Nachum Sicherman

Columbia University ( email )

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United States
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212-316-9355 (Fax)

IZA Institute of Labor Economics

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Germany

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