No. 31

Kurt Kratena (2008) International Outsourcing and the Demand For Skills, (August 2008)

This paper explores empirically the impact of international outsourcing on the demand for skills in 4 selected EU countries. A model of variable cost and factor demand functions for different skill levels and imported as well as domestic materials is set up. International outsourcing is treated directly as a substitution process between labour of different skills (tasks) and imported inputs. The impact of international outsourcing on labour is measured by the cross price elasticities. The impact of technical change is measured by quasi-fixed capital stock (measured according to the EUKLEMS methodology) and a linear trend. The indirect impact of international outsourcing - determined by the consequences of the cost savings impact of outsourcing - is also taken into account.