does outsourcing to central and eastern europe really threaten manual workers’ jobs in germany?...
TRANSCRIPT
Does Outsourcing to Central and Eastern Europe really threaten manual workers’ jobs in Germany?
Ingo Geishecker
Juni
2005
Outline
Stylised facts: Skill upgrading in manufacturing
International Outsourcing
The literature
The econometric model
Estimation
Motivation: Wage and employment trends
Unskilled worker‘s employment
Germany: continued rise in unemployment of low-skilled workers
skill upgrading of employment
Unskilled workers‘ earnings
relative wages close to stable
1975 20001980 1985 1990 1995
25%
20%
15%
10%
5%
no Training
Average
Vocational Training
University/Technical College
Unskilled unemployment
Source: IAB calculations
Shift-share analysis
change in cost share of low-skilled labour in total wage bill decomposed into change in relative wages and change in relative employment:
- 23%-pts = - 2%-pts - 21%-pts
confirms Literature on stable relative wages and relative fall in low-skill employment
Shift-share analysis
change in employment share of low-skilled labour decomposed into within-industry and cross-industry skill upgrading:
- 3.2 %-pts = - 3.9 %-pts + 0.7 %-pts
summarising: skill upgrading occurs within and not across industries under nearly constant relative wages
Question: What drives skill upgrading?
Theory of outsourcing and labour demand
General equilibrium models
• Feenstra Hanson (1996)
• Jones and Kierzkowski (2001)
• Arndt (1999)
• Kohler (2003)
• How outsourcing effects demand for low-skilled labour in general equilibrium is not clear.
• Empirical question. But first can we even find effects of outsourcing in partial equilibrium?
Empirics of fragmentation and wages
• industry level studies:
• Feenstra and Hanson (1996), Morrison-Paul and Siegel (2001) and others: composite demand equation for low-skilled labour, outsourcing is shift parameter
• problem: aggregation bias, endogeneity bias, measurement
• Falk and Koebel (2002): use relative prices and no shift parameter
• problem: outsourcing only captured by relative price changes
• micro level studies:
• Geishecker, Görg (2004) on outsourcing and wages
International Outsourcing
Use trade data, allocate imports to domestic industries by utilising input-
output data
wide definition: all imported inputs of an industry i
narrow definition: international Outsourcing is outcome of a “make or
buy” decision, hence only imported inputs from the same industry i abroad
are relevant
International Outsourcing by region
Differentiate import data by geographic region (as in Anderton and
Brenton, 1999) , allocate to industries holding use coefficient constant
wide definition:
narrow definition:
0
1
2
3
4
5
6
7
8
Ou
tso
urc
ing
inte
nsi
ty in
%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Year
Total Outsourcing Outsourcing in CECOutsourcing in EU15
Narrow Outsourcing by geographic region
Source: OECD commodity trade data, Statistisches Bundesamt Input-Output
Tables, authors calculations
Wide Outsourcing by geographic region
Source: OECD commodity trade data, Statistisches Bundesamt Input-Output
Tables, authors calculations
0
5
10
15
20
Ou
tso
urc
ing
inte
nsi
ty in
%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Year
Total Outsourcing Outsourcing in CECOutsourcing in EU15
Empirical Model
• Potential endogeneity of relative Wage and Outsourcing
•GMM using one and two year lagged values
•GMM is consistent but not efficient
•therefore endogeneity tests first
Summary
substantial within industry skill upgrading
nearly constant relative wages
in the narrow outsourcing model the predicted overall decline in manual
workers wage bill share is 4.7 %-pts
of this, increasing outsourcing can explain 2.7 %-pts
technological progress can explain almost 3 %-pts
with nearly constant relative wages, decline in relative demand has to be met
by reductions in relative employment
Therefore: manual workers jobs are indeed threatened by outsourcing towards
CEC
0
0.2
0.4
0.6
0.8
11.2
1.4
1.6
1.8
2
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Unit Value
PPI
Intermediate Imports
Source: OECD, Statistical Office Germany
Prices for intermediate imports
International Outsourcing
Z*
CS
CN
C´S
Z´
CN,S=f(wHS, wLS , r, A)
skill intensity
unit costs
Feenstra and Hanson (1996)
Narrow outsourcing by industry
01234
0.51
1.52
02468
10
05
101520
05
10152025
012345
05
101520
0
.5
1
1.5
02468
0
5
10
15
0.2.4.6.81
0.51
1.52
2.5
0
5
10
15
0
.5
1
1.5
02468
010203040
02468
05
10152025
01234
02468
10
010203040
02468
(15) Food (16) Tobacco (17) Textiles (18) Clothing (19) Leather
(20) Wood (21) Paper (22) Publishing (23) Coke,Petroleum (24) Chemicals
(25) Rubber, Plastic (26) Glas, Ceramic (27) Basic metals (28) Fabricated metal (29) Machinery
(30) Computer (31) Electrical equ. (32) Radio, TV (33) Instruments (34) Motor vehicles
(35)Transport equ. (36) Furniture,n.e.c.
TotalOutsourcing Outsourcing in EU15Outsourcing in CEC
Ou
tso
urc
ing
In
ten
sitä
t in
%
Jahr
Wide outsourcing by industry
0
5
10
15
05
101520
05
10152025
010203040
0
10
20
30
0
5
10
15
05
10152025
02468
020406080
100
05
101520
05
101520
02468
0
10
20
30
02468
10
0
5
10
15
01020304050
0
5
10
15
0
10
20
30
0
5
10
15
05
101520
010203040
05
101520
(15) Food (16) Tobacco (17) Textiles (18) Clothing (19) Leather
(20) Wood (21) Paper (22) Publishing (23) Coke,Petroleum (24) Chemicals
(25) Rubber, Plastic (26) Glas, Ceramic (27) Basic metals (28) Fabricated metal (29) Machinery
(30) Computer (31) Electrical equ. (32) Radio, TV (33) Instruments (34) Motor vehicles
(35)Transport equ. (36) Furniture,n.e.c.
TotalOutsourcing Outsourcing in EU15Outsourcing in CEC
Ou
tso
urc
ing
In
ten
sitä
t in
%
Jahr