implications of offshoring on the industries skill ratio seem to be primarily driven
by the industry where offshoring takes place, and only minor by the skill intensity of
the relocated production fragments. Consider e.g. the high skill intensive X industry:
If the industry offshores its low skill intensive production parts (i VS X → L), the
estimated coefficient on the industries‘ high skill labor ratio is positive, quite high, and
at a high level of statistical significance. If the industry offshores its high skill intensive
parts of production (i VS X → H), the estimated coefficient is slightly smaller, but still
highly significant positive. Thus, even if the industry offshores its high skill intensive
parts of production, production shifts towards more high skilled labor. The same
pattern holds for the low skill intensive Y industry. If the industry offshores its high
skill intensive parts (i VS Y → H), the effect on the industries’ high skill labor ratio is
strongly significant negative. However, the effects also show a negative tendency (even
when being slightly outside a common level of statistical significance) if the industries
relocate their low skill intensive parts of production (i VS Y → L).
5 Discussing the Results
As the empirical results for Germany show, implications on the high skill labor ratio
are mainly driven by the skill intensity of the industry where offshoring takes place,
and only to a lesser extent by the skill intensity of the relocated production block. This
supports the “sector bias” of offshiring. However, the empirical tendencies found here
show opposite directions: Whereas offshoring in relative high skill intensive industries
increases the high skill labor ratio (theory would predict a decrease), offshoring in
relative low skill intensive industries decreases the high skill labor ratio (theory would
predict an increase). Even if our results seem to conflict with theory in this respect,
they are in line with other empirical findings as e.g. the ones by Falzoni and Tajoli
(2010) for the Italian economy. Thus, there seems to be a puzzle concerning theoretical
and empirical evidence. In order to shed some more light onto this puzzle, this section
discusses the link between empirical and theoretical findings as well as the importance
of the specific empirical situation in greater detail.
Theoretical implications on relative wages are mostly quite clear cut. While rela-
tive high skill wages are expected to increase if offshoring takes place in relative high
skill intensive industries, they are expected to decrease if it takes place in relative low
skill intensive ones. The driving force behind these results is the assumption that off-
shoring induces a productivity-enhancing effect, similar than skill biased technological
progress. However, when turning to the effects on the high skill labor ratio, as the
industries’ production structure, results are not as clear cut anymore. As mentioned in
the theoretical section above, a wage-effect gets accompanied by an offshoring-effect,
with the possibility of both effects outperforming each other. As shown in Horgos
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