GEP Research Paper 00/10
The Impacts of Technology, Trade and Outsourcing on Employment and Labour Composition
Caherine Morrison Paul and Don Siegel
This paper was subsequently published in Scandinavian Journal of Economics, Vol.103(2001), pp.241-264.
Abstract
Since the late 1970s, there has been a shift in compensation and labour composition in favour of highly educated workers. A number of recent papers have identified trade, technology, and outsourcing as possible "causes" of these changes. Most of these studies have been based on a simple production or cost function framework and limited information on investment in technology and labour composition. In this paper, we examine the relationship between trade, technology, and outsourcing and shifts in labour demand using dynamic cost function estimation and more comprehensive measures of labour composition and technological advance. Our findings indicate that technological change has had the greatest effect on changes in labour composition. However, the indirect impact of foreign trade on employment patterns augments its direct impact because trade stimulates computerisation, which leads to further reductions in the demand for workers without a college degree and increases in the demand for workers with a college degree.
Issued in May 2000.
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