THE EFFECTS OF OFFSHORING TO LOW-WAGE COUNTRIES ON DOMESTIC WAGES – A WORLDWIDE INDUSTRIAL ANALYSIS

Joanna Wolszczak-Derlacz and Aleksandra Parteka

No 36, GUT FME Working Paper Series A from Faculty of Management and Economics, Gdansk University of Technology

Abstract: This paper extends the literature on the implications of offshoring for labour markets by investigating its effect on the wages of different skill groups in a broad global context. The analysis draws on input-output data from the WIOD project, and in the panel analysed (13 manufacturing industries, 40 countries, 1995 – 2009) we capture up to 96% of the international trade in manufacturing inputs. Being particularly interested in the wage effects of offshoring to low wage countries (LWC), we employ precise LWC classifications (varying across industries and time) to decompose overall offshoring by source country. We employ a decomposition of the conventional offshoring measure in order to capture its pure international component, which is further instrumented using a gravity-based strategy. According to the estimation results, the negative impact of offshoring on wages mainly concerns low and medium skilled workers. However, in terms of magnitude, the downward pressure on domestic wages exhibited by offshoring to LWC is relatively small. LWC (Low wage countries) classifications employed in this paper are downloadable at: http://zie.pg.edu.pl/aparteka/publications [file LowWageCountries_classifications_WolszczakDerlacz_Parteka].

Keywords: wage; offshoring; input-output; low-wage countries (search for similar items in EconPapers)
JEL-codes: C67 F14 F16 F66 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (1)

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https://cdn.files.pg.edu.pl/zie/Strona%20polska/Na ... s/WP_GUTFME_A_36.pdf First version, 2016 (application/pdf)

Related works:
Journal Article: The effects of offshoring to low-wage countries on domestic wages: a worldwide industrial analysis (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:gdk:wpaper:36

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