The Displacement Effects of Domestic Outsourcing

Mayara Felix and Michael B. Wong

No 35584, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Evidence that domestic outsourcing lowers pay comes largely from on-site transfers, in which workers move to a contractor but keep the same jobs. Displacement is rarely observed: whether workers lose their jobs, where they go, how earnings evolve. In Brazil’s 1993–1994 pro-outsourcing reforms, which differentially affected security guards, such transfers were rare; firms instead used occupational layoffs, shedding their guards while keeping other workers. Displaced guards’ employment recovered within five years, but many changed occupations and wages stayed about 12% lower. Lifetime losses average 1.2 to 1.5 years of pre-layoff earnings, concentrated among workers from high-wage firms, reflecting lost premia.

JEL-codes: J31 J63 L24 (search for similar items in EconPapers)
Date: 2026-08
Note: DEV LS
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