Specialization, outsourcing and wages
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This paper studies the impact of outsourcing on individual wages. In contrast to the standard approach in the literature, we focus on domestic outsourcing as well as foreign outsourcing. We argue that if outsourcing is associated with specialization gains arising from an increase in the division of labor, domestic outsourcing tends to increase wages for both unskilled and skilled labor. We use a panel data set of workers in Danish manufacturing industries to show that domestic and foreign outsourcing affect wages as predicted.
KeywordsOutsourcing Comparative advantage Specialization Wages
JEL ClassificationF16 J31 C23
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Financial support from the Danish Social Science Research Council is gratefully acknowledged. The paper has benefitted from comments from seminar participants at Department of Economics, Aarhus University and Economic Policy Research Unit, University of Copenhagen.
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