The effect of outsourcing on the demand for skills in the Spanish manufacturing industry

Abstract

This study analyses the effect of outsourcing on the demand for skills in the Spanish manufacturing industries. For the first time in the literature the origin of outsourcing is taken into account, distinguishing imports coming from developing countries and imports produced in developed countries. As theoretically expected, a positive link is found between outsourcing to developing countries and a higher demand for skills in the Spanish manufacturing sectors. However, it is found that outsourcing to developed countries also has a positive effect on the demand for skills. This later result may cast some doubts on previous studies’ conclusions.

Notes

¹ Some studies, such as Kandogan (2003), have proxied outsourcing with the level of vertical intra-industry trade.

² Skilled workers are proxied by workers with tertiary education. For unskilled workers we use two definitions: the first includes workers with secondary schooling or less; the second – which is more restrictive – only includes workers with primary schooling or less. Skilled/unskilled workers ratios, taking into account each of the two unskilled workers definition given previously, are named Ocup1 and Ocup2 respectively. Data on workers’ educational attainment, research and development expenditures and value added were obtained from various INE's data-base. Data on capital were obtained from Fundación BBV (1998).

³ In Feenstra and Hanson (1996) Snj stands for skilled workers share in j sector's total wage bill. However, these data are not available for Spain and one has to use the skilled/unskilled workers’ ratio instead. Nevertheless, this omission is less damaging for the present case due to the rigidities of the Spanish labour market, where shifts in demand affect quantities rather than prices.

⁴ As results for the dependent variables Ocup2 are very similar only the results for Ocup1 are presented.