revised version published as 'Winners and losers: A micro-level analysis of international outsourcing and wages' in: Canadian Journal of Economics / Revue canadienne d'économique, 2008, 41(1), 243-270
Our paper investigates the link between outsourcing and wages utilising a large household
panel and combining it with industry level information on industries’ outsourcing activities
from input-output tables. By doing so we can arguably overcome the potential endogeneity
bias as well as other shortcomings that affect industry level studies. We find that
fragmentation has had a marked impact on wages. Distinguishing three skill categories we
find evidence that outsourcing reduced the real wage for workers in the lowest skill
categories; this result is robust to a number of different specifications and definitions of
outsourcing. Furthermore we find some evidence that high-skilled workers experienced
increased wages due to fragmentation.
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