Skill Intensity of Labor Outsourcing and International Trade – Vladimir Tyazhelnikov

Speaker

Vladimir Tyazhelnikov (University of Sydney)

Abstract

This study utilizes firm-level data from Chile to examine the outsourcing dynamics of high- and low-skilled tasks, considering the impact of increasing competition from Chinese goods in both the domestic (Chilean) and foreign markets. Using the shift shares approach, we investigate the effects of domestic and foreign competition on outsourcing levels and wages for different skill categories. Surprisingly, our findings indicate that domestic competition negatively affects both outsourcing and wages for skilled jobs, whereas foreign competition has a positive effect on outsourcing and wages for high-skilled workers. To explain these results, we develop a model based on non-Hicks neutral production technology, where more productive and larger firms require a higher proportion of skilled workers. In this model, domestic competition shocks influence the entire population of firms, while foreign competition shocks primarily impact the most productive firms that heavily rely on high-skilled labor. Consequently, these shocks have ripple effects throughout the domestic labor market, partially mitigating the direct impact of heightened competition. The empirical findings align with the predictions of our model, providing further support for its validity.

Room

Lecture Hall (A-032)