DP6484 Winners and losers: A Micro-level Analysis of International Outsourcing and Wages

Author(s): Ingo Geishecker, Holger Görg
Publication Date: September 2007
Keyword(s): international outsourcing, offshoring, skills, wages
JEL(s): F16, J31
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6484

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.