International outsourcing and the productivity of low-skilled labor in the EU

Abstract

This article presents first insights into the role of international outsourcing on the productivity of low-skilled workers in EU manufacturing. Whereas in the short run international outsourcing exhibits a negative marginal effect on real value added per low-skilled worker, the long-run parameter estimates reveal a positive impact. This may be explained by imperfections in European labor and goods markets, which prohibit an immediate adjustment in the factor employment and the output structure. The change in the outsourcing intensity since 1993 alone acounts for a long-run increase of about 6.0% in the real value added per low-skilled worker.