Offshoring , tasks , and the skill - wage pattern

The paper investigates the relationship between offshoring, wages, and the ease with which individuals’ tasks can be offshored. Our analysis relates to recent theoretical contributions arguing that there is only a loose relationship between the suitability of a task for offshoring and the associated skill level. Accordingly, wage effects of offshoring can be very heterogeneous within skill groups. We test this hypothesis by combining micro-level information on wages and demographic and workplace characteristics as well as occupational information relating to the degree of offshorability with industry-level data on offshoring. Our main results suggest that in partial equilibrium, wage effects of offshoring are fairly modest but far from homogeneous and depend significantly on the extent to which the respective task requires personal interaction or can be described as non-routine. When allowing for cross-industry movement of ∗Daniel Baumgarten thanks the Leibniz Association for financial support. †Corresponding author, Georg-August-Universitäät Göttingen, Faculty of Economic Sciences, Platz der Göttinger Sieben 3, 37073 Göttingen, Germany, email: [email protected], Tel: +49 39 551 39 7327, Fax: +49 39 551 39 7880 ‡Holger Görg gratefully acknowledges financial support through the European Commission FP 7 Programme (Grant No. SSH-CT-2009-244552).