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International Outsourcing, Technological Change, and Wage Inequality
Author(s) -
Hijzen Alexander
Publication year - 2007
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2006.00623.x
Subject(s) - outsourcing , wage inequality , technological change , economics , wage , technical change , inequality , labour economics , productivity , order (exchange) , macroeconomics , business , mathematical analysis , mathematics , finance , marketing
This paper analyzes the impact of international outsourcing on UK wage inequality during the 1990s by applying the mandated wage approach proposed by Feenstra and Hanson (1999). The methodology is extended in order to obtain additional insight into the relative importance of the factor and sector bias of international outsourcing and technological change. The results indicate that technological change is the predominant force behind the increase in wage inequality, but international outsourcing also contributed significantly. In explaining the increase in wage inequality the factor bias of technological change was slightly larger than its sector bias, while for international outsourcing the sector bias was much more important. The relative importance of the two effects hinges crucially on the estimated rate of productivity passthrough.