Labor market effects of outsourcing under industrial interdependence

TLDR: In this paper, the authors consider national input-output linkages and cross industrial flows of workers as two important channels of inter-industrial spillovers in labor market effects and find that industrial interdependencies induce a multiplier effect for changes in industry-specific variables such as international outsourcing.

About: This article is published in International Review of Economics & Finance.The article was published on 2005-01-01 and is currently open access. It has received 67 citations till now. The article focuses on the topics: Outsourcing & Spillover effect.

Figures

Table 3: Regression Results - The Effects of Outsourcing on Skilled-to-Unskilled Employment in Austria

Table 4: Alternative Results - Cross-Sectional Dependence Through Worker Flows

Table 1: Descriptive Statistics - Austrian Input-Output Relations in Manufacturing (1995)

Table A.1: Descriptive statistics

Table 5: Simulating the Effect of a One-σ-Increas in Outsourcing on Skilled-to-Unskilled Employment in Austrian Manufacturing (Based on the results in Table 1)

Table 2: Descriptive Statistics - Austrian Worker Flows in Manufacturing (1995) (Sample average)

Frequently asked questions

Q1. What are the contributions mentioned in the paper "Labor market effects of outsourcing under industrial interdependence" ?

In terms of the adopted econometric specifications, one assumption is typical and as the authors will show critical in this regard. It is this paper 's focus to relax this restrictive assumption and to suggest the use of different econometric methods. The authors consider national input-output linkages and cross industrial flows of workers as two important channels of inter-industrial spillovers in labor market effects. 

Q2. What can be the effect of outsourcing on the aggregate income?

While outsourcing will increase aggregate income, it can, like international trade in goods, also lead to displacement of workers from certain sectors. 

Q3. Why is Austrian outsourcing of particular interest to economists?

Because of the country s geographical proximity to and the close historical ties with countries of Central and Eastern Europe, Austrian outsourcing is of particular interest for economists. 

Q4. What is the purpose of this paper?

It is the purpose of this paper to introduce spatial econometric methods for panel data (see Kapoor et al., 2003, and Kelejian and Prucha, 2003) in the discussion on factor market implications of international outsourcing. 

Q5. how much of the increase in relative wages in the 1980s was due to international outsourcing?

1 Feenstra and Hanson (1996a, 1999) have shown that international outsourcing accounts for up to 30% of the increase in relative wages observed in U.S. labor markets in the 1980s. 

Q6. Why do the authors focus on the determinants of outsourcing rather than on relative wages?

Since Austria is characterized by a unionized labor market, the authors focus on the determinants of outsourcing on skilled-to-unskilled employment rather than on relative wages (see Egger and Egger, 2003, for a theoretical exposition). 

Q7. How much of the estimated employment effects of international outsourcing are indirect?

it was shown that indirect spillover effects account for about two-third of the estimated employment effects of international outsourcing. 

Q8. What percentage of the output of a particular industry is used as an input in other industries?

8respective figures are in between 8% and 95%, indicating that a substantial share of a particular industry s output is used as an input in other industries. 

Q9. What is the second channel of inter-sectoral spillovers?

A second channel through which inter-sectoral spillovers may become prevalent are gross flows of (skilled and unskilled) workers between industries. 

Q10. What is the effect of spillovers on the employment of the industry?

the spillover effect takes into account that changes in a specific industry s skilled-to-unskilled labor ratio positively affect all other industries ratios and that this effect feeds back to the considered industry (see Footnote 7).