Outsourcing and skill-specific employment in a small economy: Austria and the fall of the Iron Curtain
Hartmut Egger () and
Peter Egger ()
No 2000-24, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria
We present a model, in which a small industrialised economy outsources part of its production into a small foreign country which is well endowed with low-skilled labour. We analyse under which conditions sinking trade costs stimulate outsourcing activities, thereby increasing the wage dispersion and, if labour markets are unionised, also the employment of high-skilled relative to low-skilled labour. For a panel of Austrian industries, we find first that decreasing trade barriers, which can be associated with the fall of the Iron Curtain, indeed stimulate outsourcing to Eastern Europe and the former Soviet Union, and second, that outsourcing to these countries significantly shifts relative employment in favour of high- skilled labour.
Keywords: fragmentation; skill-specific employment; simultaneous equations (search for similar items in EconPapers)
JEL-codes: C33 F14 F15 F16 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2000_24
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