Does Outsourcing Always Benefit Skilled Labor?: A Dynamic Product Cycle Model Approach
- Topics:
- Outsourced Services
- Tags:
- Benefit,
- Business Operations,
- It Operations,
- Outsourcing,
- Outsourcing & Subcontracting,
- Product Cycle,
- Worker
- Source:
- Texas A&M University
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Overview: To understand why outsourcing did not cause wage inequality in the 1970s, this paper builds a dynamic product cycle model with three kinds of labor inputs, scientists, white-collar workers, and blue-collar workers. First, there is only a homogenous representative producer in the model and then the paper allows for producer heterogeneity. According to my theoretical model, outsourcing can hurt skilled labor and does not cause wage inequality if outsourcing industries are blue-collar worker-intensive compared with non-outsourcing industries. Therefore, not all skilled workers always benefit from outsourcing. Only scientists who conduct research and development always benefit from outsourcing. This paper also employs the U.S. manufacturing data from 1972 to 1992 to support theoretical predictions.
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Format: PDF | Size: 207KB | Date: Feb 2007 | Pages: 45
