How Offshoring Can Affect the Industries’ Skill Composition

How Offshoring Can Affect the
Industries’ Skill Composition

Daniel Horgos* and Lucia Tajoli⁺

Abstract

While most offshoring literature focus on the effects on relative wages, other implications
do not receive the necessary attention. This paper investigates effects on the industries’
skill ratio. It summarizes the empirical literature, discusses theoretical findings, and pro-
vides first empirical evidence for Germany. As results show, effects are mainly driven by
the industry where offshoring takes place. In high skill intensive industries, the high skill
labor ratio increases (vice versa for low skill intensive industries). Since this result is in line
with other empirical findings but seems to contradict with theory, the paper additionally
discusses possible explanations.

Keywords:           offshoring; labor market implications; skill ratio; skill composition

JEL classification: F16, J21

^*Daniel Horgos is affiliated at Helmut Schmidt University, Hamburg and Centro Studi Luca d’Agliano,
Milano; Address of correspondence: Department of Economics, Helmut Schmidt University, Univer-
sity FAF Hamburg, Holstenhofweg 85, 22043 Hamburg, Germany, email [email protected], tel +49
40 6541 2022, fax +49 40 6541 2042.

⁺Lucia Tajoli is affiliated at Politecnico di Milano and KITeS - Bocconi University Milano; Address
of correspondence: Dipartimento di Ingegneria Gestionale, Politecnico di Milano, via Giuseppe
Colombo 40, 20133 Milano, Italy, email [email protected], tel +39 02 2399 2752, fax +39 02 2399
2710.

Thanks are due to Barbara Dluhosch, Klaus Beckmann, and Michael Berlemann. This paper was
written while Daniel Horgos visited the Centro Studi Luca d’Agliano, Milan, joining the project
“Globalization, Investment, and Services Trade (GIST)”, a Marie Curie Initial Training Network,
funded under the EU’s Seventh Framework Program.

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