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International Outsourcing and Wage Rigidity

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  • Daniel Horgos

    (Helmut Schmidt University, Hamburg)

Abstract

In industrialized economies, International Outsourcing is often blamed for destroying jobs and thus, inducing unemployment. Since most contributions examining International Outsourcing assume flexible wages, they do not address these concerns directly. This paper adopts a rigid wage approach and investigates the differences occurring. As theoretical results and the empirical panel data estimations for Germany show, effects depend on industry aggregation, the industry's skill intensity, and the labor market institution. Only in industries characterized by wage rigidity, outsourcing significantly increases low skilled unemployment. Consequently, not International Outsourcing but inflexible labor market institutions instead should be blamed for destroying low skill jobs.

Suggested Citation

  • Daniel Horgos, 2012. "International Outsourcing and Wage Rigidity," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 12(2), pages 1-28, April.
    • Handle: RePEc:wsi:gejxxx:v:12:y:2012:i:02:n:1524-5861.1844
    DOI: 10.1515/1524-5861.1844
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