International outsourcing of skill intensive tasks and wage inequality

Author(s)
Anwar, Sajid
Sun, Sizhong
Valadkhani, Abbas
Publication Date
2013
Abstract
Within the context of a product variety model, this paper examines the impact of international outsourcing of some skill intensive tasks on wage inequality. We consider four possibilities: long-run equilibrium where varieties of producer services are non-traded, long-run equilibrium where varieties of producer services are traded, short-run equilibrium where varieties of producer services are non-traded and short-run equilibrium where varieties of producer services are traded. It is shown that in each case, under certain conditions, international outsourcing can increase skilled-unskilled wage inequality. In the first three cases, outsourcing affects wage inequality directly as well as indirectly. In the short-run equilibrium, where varieties of producer services are traded, international outsourcing increases skilled-unskilled wage inequality only through an indirect channel. In the short-run equilibrium, where all goods are traded, the impact of outsourcing on wage inequality depends solely on the relative size of the income share of capital. Furthermore, in the long-run equilibrium, outsourcing increases the productivity of the industrial sector.
Citation
Economic Modelling, v.31, p. 590-597
ISSN
1873-6122
0264-9993
Link
Publisher
Elsevier BV
Title
International outsourcing of skill intensive tasks and wage inequality
Type of document
Journal Article
Entity Type
Publication

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