You're In Then You're Out: The Incidence of Being Outsourced
Publication Date
1-1-2014
Grant Type
Early Career Research Award
Description
We analyze the effects of outsourcing labor services, focusing in particular on janitorial, security and food services. Using administrative data from Germany we develop a new method for identifying outsourcing based on workers flows. Using an event-study analysis joint with propensity score matching, preliminary results show that wages of outsourced workers fall by approximately 10-15% relative to similar workers who are not outsourced. We interpret our effects using a model of fair wages, where workers care about their own wage relative to the wage of other workers in their firm. Intra-firm wages are compressed in such a model and create an incentive to outsource parts of the labor force. We show how outsourcing can be used to estimate the structural parameter that determines the extent to which workers care about coworkers' wages.
Grant Product
The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure
Upjohn Institute Working Paper No. 15-244, 2015
Domestic Outsourcing Reduces Wages and Contributes to Rising Inequality Employment Research 23(1): 4-6
The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure National Bureau of Economic Research Working Paper No. 21366, 2015
The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure
IZA Discussion Paper No. 9194, 2015
The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure The Quarterly Journal of Economics 132(3): 1165-1217