Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73298
Authors: 
Egger, Hartmut
Egger, Peter
Year of Publication: 
2000
Series/Report no.: 
Working Paper, Department of Economics, Johannes Kepler University of Linz 0024
Abstract: 
We present a model, in which a small industrialised economy outsources part of its production into a small foreign country which is well endowed with low-skilled labour. We analyse under which conditions sinking trade costs stimulate outsourcing activities, thereby increasing the wage dispersion and, if labour markets are unionised, also the employment of high-skilled relative to low-skilled labour. For a panel of Austrian industries, we find first that decreasing trade barriers, which can be associated with the fall of the Iron Curtain, indeed stimulate outsourcing to Eastern Europe and the former Soviet Union, and second, that outsourcing to these countries significantly shifts relative employment in favour of high- skilled labour.
Subjects: 
fragmentation
skill-specific employment
simultaneous equations
JEL: 
C33
F14
F15
F16
Document Type: 
Working Paper

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