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Abstract. Our paper investigates the link between international outsourcing and wages utilizing a large household panel and combining it with industry‐level information on industries' outsourcing activities from input‐output tables. This approach avoids problems such as aggregation bias, potential endogeneity bias, and poor skill definitions that commonly hamper industry‐level studies. We find that outsourcing has had a marked impact on wages. Applying two alternative skill classifications, we find evidence that a 1 percentage point increase in outsourcing reduced the wage for workers in the lowest skill categories by up to 1.5%, while it increased wages for high‐skilled workers by up to 2.6%. This result is robust to a number of different specifications.
Geishecker et al. (Wed,) studied this question.
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