INTEGRATED SECTORS - DIVERSIFIED EARNINGS: THE (MISSING) IMPACT OF OFFSHORING ON WAGES AND WAGE CONVERGENCE IN THE EU27

Aleksandra Parteka and Joanna Wolszczak-Derlacz

No 24, GUT FME Working Paper Series A from Faculty of Management and Economics, Gdansk University of Technology

Abstract: This paper assesses the impact of international outsourcing/offshoring practices on the process of wage equalization across manufacturing sectors in a sample of EU27 economies (1995-2009). We discriminate between heterogeneous wage effects on different skill categories of workers (low, medium and high skill). The main focus is on the labour market outcomes of vertical integration, so we augment a model of conditional wage convergence through the inclusion of sector-specific broad and narrow outsourcing/offshoring indices based on input-output data (World Input Output Database, April 2012 release). Two-way relations between trade and wages are addressed through the use of a gravity-based sector-level instrument. We find no evidence supporting unconditional skill-specific wage convergence in EU sectors. In a conditional setting, (slow) wage convergence takes place, but international outsourcing plays a negligible role in wage equalization. Moreover, even though regression results indicate that offshoring reduces the wage growth of domestic medium- and low-skilled workers, we show that this negative effect is economically small.

Keywords: wage; convergence; international outsourcing; offshoring; input-output (search for similar items in EconPapers)
JEL-codes: C67 F14 F16 F66 (search for similar items in EconPapers)
Date: 2014-10, Revised 2014-10
New Economics Papers: this item is included in nep-eur, nep-int, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://cdn.files.pg.edu.pl/zie/Strona%20polska/Na ... s/WP_GUTFME_A_24.pdf Revised version, 2014 (application/pdf)

Related works:
Journal Article: Integrated sectors - diversified earnings: the (missing) impact of offshoring on wages and wage convergence in the EU27 (2015)
Working Paper: Integrated Sectors - Diversified Earnings: The (Missing) Impact of Offshoring on Wages and Wage Convergence in the EU27 (2013)
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