Specialization, Outsourcing And Wages
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Overview: In contrast to the standard approach in the literature, authors focus on domestic outsourcing as well as foreign outsourcing. By using a simple theoretical model, authors argue that, if outsourcing is associated with specialization gains arising from an increase in the extent of the market for intermediate goods, domestic outsourcing tends to increase wages for both unskilled and skilled labor. The authors use a panel data set of workers in Danish manufacturing industries, to show that domestic outsourcing as well as foreign outsourcing affects wages. This paper highlights the impact of outsourcing on individual wages.