Working Paper: CEPR ID: DP7756
Authors: Daniel Baumgarten; Ingo Geishecker; Holger Görg
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 Codes: F1; F2; J3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Offshoring (F23) | Wages (Partial Equilibrium) (J31) |
| Offshoring (F23) | Wages (General Equilibrium) (J31) |
| Offshoring (Low and Medium-Skilled Workers) (F66) | Wage Reductions (J31) |
| Offshoring (Low-Skilled Workers with High Interactivity) (F66) | Cumulative Wage Reduction (J31) |
| Offshoring (Low-Skilled Workers with Lowest Interactivity) (F66) | Largest Wage Cuts (J38) |
| Offshoring (High-Skilled Workers) (J24) | Statistically Insignificant Wage Effects (J31) |