Nottingham Centre for Research on
Globalisation and Economic Policy (GEP)

GEP Research Paper 03/41

Winners and Losers: Fragmentation, Trade and Wages Revisited

Ingo Geishecker and Holger Görg

Abstract

Our paper investigates the link between outsourcing and wages utilising a large household panel and combining it with industry level information on industries' outsourcing activities from input-output tables. By doing so we can arguably overcome the potential endogeneity bias as well as other shortcomings that affect industry level studies. We find that fragmentation has had a marked impact on wages. Distinguishing three skill categories we find evidence that outsourcing reduced the real wage for workers in the lowest skill categories; this result is robust to a number of different specifications and definitions of outsourcing. Furthermore we find some evidence that high-skilled workers experienced increased wages due to fragmentation.

Issued in November 2003.

This paper is available in PDF format.

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