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Is Human Capital Losing from Outsourcing?

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  • Marin, Dalia
  • Lorentowicz, Andzelika
  • Raubold, Alexander

Abstract

Feenstra and Hanson (1997) have argued in the context of the North American Free Trade Agreement that US outsourcing to Mexico leads to an increase in the skill premium in both the US and Mexico. In this paper we show on the example of Austria and Poland that with the new international division of labour emerging in Europe Austria, the high income country, is specializing in the low skill intensive part of the value chain and Poland, the low income country, is specializing in the high skill part. As a result, skilled workers in Austria are losing from outsourcing, while gaining in Poland. In Austria, relative wages for human capital declined by 2 percent during 1995-2002 and increased by 41 percent during 1994-2002 in Poland. In both countries outsourcing contributes roughly 35 percent to these changes in the relative wages for skilled worker. Furthermore, we show that Austria's R&D policy has contributed to an increase in the skill premium there.

Suggested Citation

  • Marin, Dalia & Lorentowicz, Andzelika & Raubold, Alexander, 2005. "Is Human Capital Losing from Outsourcing?," CEPR Discussion Papers 5344, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5344
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    7. Giovanni S.F. Bruno & Rosario Crinò & Anna M. Falzoni, 2004. "Foreign Direct Investment, Wage Inequality, and Skilled Labor Demand in EU Accession Countries," Development Working Papers 188, Centro Studi Luca d'Agliano, University of Milano.
    8. Marin, Dalia, 2006. "A New International Division of Labour in Europe," CEPR Discussion Papers 5447, C.E.P.R. Discussion Papers.
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    10. Dalia Marin, 2006. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 612-622, 04-05.
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    Cited by:

    1. Rosario Crinò, 2009. "Offshoring, Multinationals And Labour Market: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(2), pages 197-249, April.
    2. Özlem Onaran, 2008. "The Effects of Globalization on Wages, Employment, and Wage Share in Austria," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 34(3), pages 337-360.
    3. Heijdra, Ben J. & Ligthart, Jenny E., 2010. "The Transitional Dynamics Of Fiscal Policy In Small Open Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 14(1), pages 1-28, February.
    4. Dalia Marin, 2006. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 612-622, 04-05.
    5. repec:dau:papers:123456789/179 is not listed on IDEAS
    6. Cazzavillan, Guido & Olszewski, Krzysztof, 2011. "Skill-biased technological change, endogenous labor supply and growth: A model and calibration to Poland and the US," Research in Economics, Elsevier, vol. 65(2), pages 124-136, June.
    7. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "Distributional Effects of Globalization in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 39-82, March.
    8. Vito Amendolagine & Rosa Capolupo & Giovanni Ferri, 2008. "Offshoring, Extent of the Shadow Economy and Firm Performance. Evidence from Italy," SERIES 0021, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Mar 2008.
    9. Mary Amiti & Shang-Jin Wei, 2005. "Service Offshoring, Productivity, and Employment: Evidence from the United States," IMF Working Papers 2005/238, International Monetary Fund.
    10. Gabrisch, Hubert, 2009. "Vertical Intra-Industry Trade, Technology and Income Distribution: A Panel Data Analysis of EU Trade with Central-East European Countries," MPRA Paper 64181, University Library of Munich, Germany.
    11. Pflüger Michael & Blien Uwe & Möller Joachim & Moritz Michael, 2013. "Labor Market Effects of Trade and FDI – Recent Advances and Research Gaps," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(1), pages 86-116, February.
    12. Marin, Dalia, 2005. "A New International Division of Labor in Europe: Offshoring and Outsourcing to Eastern Europe," Discussion Papers in Economics 714, University of Munich, Department of Economics.
    13. Syeda Tamkeen Fatima & Abdul Qayyum Khan, 2018. "Foreign direct investment and its impact on real wages: evidence from Turkish micro-level data," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(6), pages 732-749, November.
    14. Crinò, Rosario, 2012. "Imported inputs and skill upgrading," Labour Economics, Elsevier, vol. 19(6), pages 957-969.
    15. Özlem Onaran, 2007. "The effects of globalization on income distribution," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 100, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    16. Onaran, Özlem, 2008. "The effect of import penetration on labor market outcomes in Austrian manufacturing industry," Department of Economics Working Paper Series 119, WU Vienna University of Economics and Business.
    17. Gianpaolo Rossini, 2007. "Pitfalls in Private and Social Incentives of Vertical Cross‐border Integration and Disintegration," Review of International Economics, Wiley Blackwell, vol. 15(5), pages 932-947, November.
    18. Fatima, Syeda Tamkeen, 2014. "Off-Shoring and Wage Inequality: where do we stand?," IEE Working Papers 207, Ruhr University Bochum, Institute of Development Research and Development Policy (IEE).
    19. Marin, Dalia, 2006. "A New International Division of Labour in Europe," CEPR Discussion Papers 5447, C.E.P.R. Discussion Papers.
    20. Károly Attila SOÓS, 2013. "The Role of Intra-Industry Trade in the Industrial Upgrading of the 10 CEECs New Members of the European Union," KIER Working Papers 868, Kyoto University, Institute of Economic Research.
    21. Piero Esposito & Robert Stehrer, 2009. "The sector bias of skill-biased technical change and the rising skill premium in transition economies," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 36(3), pages 351-364, August.
    22. Paola Anitori, 2016. "Effetti dell?offshoring sull?occupazione manifatturiera italiana negli anni 2000-2011," ECONOMIA E SOCIET? REGIONALE, FrancoAngeli Editore, vol. 0(3), pages 144-180.
    23. Giuseppe Celi, 2021. "The Labour Market Effects of International Trade in the Presence of Vertical Product Differentiation: Some Methodological Remarks in Retrospect," JRFM, MDPI, vol. 14(3), pages 1-26, March.

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    More about this item

    Keywords

    Foreign direct investment; Wage inequality; Transition economics;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages

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