The dynamics of profits and wages: technology, offshoring and demand

Francesco Bogliacino, Dario Guarascio and Valeria Cirillo

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: This article explores the impact of innovation, offshoring and demand on profits and wage dynamics. Empirical analysis is performed on a panel of 37 industries (1995-2010) across five European countries. Our identification strategy relies on instrumental variables and recently proposed heteroskedasticity-based instruments (Lewbel, 2012). Additionally, we perform sensitivity analysis to account for omitted variables bias following the recent theoretical results of Oster (2015). The main results of our study can be summed up in three points. First, it highlights the contrasting effects of R&D and offshoring as wage determinants. Second, it shows that external demand is a key variable driving profits growth. Third, the categorization of workers according to skill level shows that high-skilled workers are favored by both innovation and offshoring, offshoring exerts downward pressure primarily on low-skilled wages and profits are positively correlated with high-skill wages, negatively correlated with medium-skill wages and not correlated with low-skill wages.

Keywords: rent; surplus; distribution; inequality; skills; offshoring; R&D (search for similar items in EconPapers)
Date: 2016-03-02
New Economics Papers: this item is included in nep-cse, nep-eec, nep-ino, nep-sbm and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Journal Article: The dynamics of profits and wages: technology, offshoring and demand (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2016/04

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