Working Paper: CEPR ID: DP6484
Authors: Ingo Geishecker; Holger Gorg
Abstract: Our paper investigates the link between international outsourcing and wages utilizing a large household panel and combining it with industry level information on industries' outsourcing activities from input-output tables. This approach avoids problems such as aggregation bias, potential endogeneity bias and poor skill definitions that commonly hamper industry-level studies. We find that outsourcing has had a marked impact on wages. Applying two alternative skill classifications we find evidence that a one percentage point increase in outsourcing reduced the wage for workers in the lowest skill categories by up to 1.5% while it increased wages for high-skilled workers by up to 2.6%. This result is robust to a number of different specifications.
Keywords: international outsourcing; offshoring; skills; wages
JEL Codes: F16; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| International outsourcing (L24) | Wages of low-skilled workers (J31) |
| International outsourcing (L24) | Wages of high-skilled workers (J31) |
| Individual skill levels (Z22) | Impact of outsourcing on wages (F66) |
| Outsourcing intensity (L24) | Wages of low-skilled workers (J31) |
| Outsourcing intensity (L24) | Wages of high-skilled workers (J31) |