Outsourcing and Technological Change

41 Pages Posted: 6 Oct 2005

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: May 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.

Keywords: Technological change, outsourcing

JEL Classification: M55, O33

Suggested Citation

Bartel, Ann P. and Lach, Saul and Sicherman, Nachum, Outsourcing and Technological Change (May 2005). CEPR Discussion Paper No. 5082. Available at SSRN: https://ssrn.com/abstract=776684

Ann P. Bartel (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

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Saul Lach

Hebrew University of Jerusalem - Department of Economics ( email )

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Israel
+972 2 588 3253 (Phone)
+972 2 581 6071 (Fax)

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

CEPR

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United Kingdom

Nachum Sicherman

Columbia University ( email )

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New York, NY 10027
United States
212-854-4464 (Phone)
212-316-9355 (Fax)

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

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