Kiel Working Papers, Kiel Institute for World Economics
No 1603:
Offshoring, tasks, and the skill-wage pattern
Daniel Baumgarten, Ingo Geishecker and 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 infor- mation
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: tasks, offshoring, outsourcing, skills, wages; (follow links to similar papers)
JEL-Codes: F1,; F2,; J3; (follow links to similar papers)
46 pages, March 2010
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