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Outsourcing and the Skilled-Unskilled Wage Gap
Journal article   Open access   Peer reviewed

Outsourcing and the Skilled-Unskilled Wage Gap

Sajid Anwar
Economics Letters, Vol.118(2), pp.347-350
2013
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https://doi.org/10.1016/j.econlet.2012.11.024View
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Abstract

skilled-unskilled wage gap outsourcing product varieties monopolistic competition
Within the context of a product variety model, this paper examines the impact of outsourcing of skill-intensive tasks on skilled-unskilled wage gap. Outsourcing affects the wage gap through direct as well as indirect channels. While outsourcing decreases the effective wage of skilled workers in the services sector, owing to inter-sectoral labour mobility, its overall impact on the equilibrium skilled wage is positive. Through an increase in the size of external economies in the industrial sector, outsourcing can reduce the unskilled wage. In overall terms, outsourcing of skill-intensive tasks increases the skilled-unskilled wage gap.

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