Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland

Feenstra and Hanson (1997) have argued in the context of the North
American Free Trade Agreement that US outsourcing to Mexico leads
to an increase in the skill premium in both the US and Mexico. In
this paper we show on the example of Austria and Poland that with
the new international division of labor emerging in Europe Austria,
the high income country, is specializing in the low skill intensive
part of the value chain and Poland, the low income country, is
specializing in the high skill part. As a result, skilled workers
in Austria are losing from outsourcing, while gaining in Poland. In
Austria, relative wages for human capital declined by 2 percent
during 1995-2002 and increased by 41 percent during 1994-2002 in
Poland. In both countries outsourcing contributes roughly 35
percent to these changes in the relative wages for skilled workers.
Furthermore, we show that Austria’s R&D policy has contributed
to an increase in the skill premium there.