The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation...
Transcript of The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation...
![Page 1: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/1.jpg)
The effects of outsourcing on
unemployment
The Hague, 13 March 2013
Jan Möhlmann
Joint work with Stefan Groot
![Page 2: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/2.jpg)
![Page 3: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/3.jpg)
Motivation
Outsourcing leads to further fragmentation of the
production process (output : value added went from 3.4 to 4.4 in past 20 years)
Allows more specialisation and productivity increases in the long run
Can have distributional effects and cause temporary unemployment
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Aims
Analysing the hazard rate of becoming involuntary unemployed, and the probability of finding a new job after becoming unemployed
In particular, we look at the effects of outsourcing (domestic and international) on these hazard rates
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Outline
Data and stylized facts
◦ outsourcing survey
◦ unemployment data
Methodology
◦ Cox proportional hazard model
Estimation results
◦ hazard rate of becoming unemployed
◦ probability of finding a new job
Conclusions
![Page 6: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/6.jpg)
Outsourcing survey
Survey on outsourcing, by Eurostat in 2007
± 1000 firms (with > 100 employees)
Binary measure:
“did you outsource between 2001-2006, yes/no?”
Distinction made between domestic and international
- Data
- Method
- Results
- Conclusions
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Outsourcing shares (2001 – 2006) by size classes (2007)
and destination
About 26% of the firms outsourced some of its
activities between 2001-2006
0%
5%
10%
15%
20%
25%
30%
35%
40%
Q1 Q2 Q3 Q4 Q5
both
outsourced internationally
outsourced domestically
- Data
- Method
- Results
- Conclusions
![Page 8: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/8.jpg)
Outsourcing shares (2001 – 2006) by destination
- Data
- Method
- Results
- Conclusions
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Unemployment data
Tax data (SSB-Banen) contain information on all
matches between employers and employees (2000-
2008)
These data can‟t distinguish between voluntary and
involuntary unemployment
Therefore we use data on unemployment benefits (SSB-
WW)
Merged with jobs based on end-date of job and start-
date of unemployment benefits
- Data
- Method
- Results
- Conclusions
![Page 10: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/10.jpg)
Outline
Data and stylized facts
◦ outsourcing survey
◦ unemployment data
Methodology
◦ Cox proportional hazard model
Estimation results
◦ hazard rate of becoming unemployed
◦ probability of finding a new job
Conclusions
![Page 11: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/11.jpg)
Cox proportional hazard model
This is a duration model, that explains the hazard rate
conditional on the duration
For example: ht is the probability of becoming
unemployed shortly after „surviving‟ for period t.
The hazard rate is explained by:
◦ (i) a base hazard rate that varies over time
◦ (ii) a linear function of some explanatory variables
- Data
- Method
- Results
- Conclusions
![Page 12: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/12.jpg)
Cox proportional hazard model Every job (fiscal relation between employer and employee) is
an observation
For each job the model needs the duration and failure
(yes/no)
A job can end in three ways:
◦ (i) involuntary (failure)
◦ (ii) voluntary (no failure)
◦ (iii) still exists in 2008 (no failure)
A job only affects the estimation results up until the duration
of the job
- Data
- Method
- Results
- Conclusions
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Base hazard rate
- Data
- Method
- Results
- Conclusions
![Page 14: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/14.jpg)
Outline
Data and stylized facts
◦ outsourcing survey
◦ unemployment data
Methodology
◦ Cox proportional hazard model
Estimation results
◦ hazard rate of becoming unemployed
◦ probability of finding a new job
Conclusions
![Page 15: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/15.jpg)
Becoming unemployed
no outsourcing vs outsourcing
- Data
- Method
- Results
- Conclusions
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Becoming unemployed
no outsourcing vs outsourcing no outsourcing vs domestic
- Data
- Method
- Results
- Conclusions
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Becoming unemployed
0
0.5
1
1.5
2
2.5
3
female foreign employee (high income
country)
foreign employee (low income
country)
outsourced internationally
outsourcing domestically
- Data
- Method
- Results
- Conclusions
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Becoming unemployed
Interaction with wage quartiles (boundaries are 28k, 38k, 54k in 2008 wages):
- Data
- Method
- Results
- Conclusions
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Q1 (no) Q2 (no) Q3 (no) Q4 (no) Q1 (dom)
Q2 (dom)
Q3 (dom)
Q4 (dom)
Q1 (int) Q2 (int) Q3 (int) Q4 (int)
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Finding a new job
no outsourcing vs outsourcing
- Data
- Method
- Results
- Conclusions
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Finding a new job
no outsourcing vs outsourcing no outsourcing vs international
- Data
- Method
- Results
- Conclusions
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Finding a new job
0.6
0.7
0.8
0.9
1
1.1
1.2
female foreign employee (high income
country)
foreign employee (low income
country)
outsourced internationally
outsourcing domestically
- Data
- Method
- Results
- Conclusions
![Page 22: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/22.jpg)
Outline
Data and stylized facts
◦ outsourcing survey
◦ unemployment
Methodology
◦ Cox proportional hazard model
Estimation results
◦ hazard rate of becoming unemployed
◦ probability of finding a new job
Conclusions
![Page 23: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/23.jpg)
Conclusions (i)
Hazard rate for involuntary unemployment seems to
follow U-shape
Controlling for duration, risk is higher for women and
foreign employees
Different effects for domestic outsourcing (52% more
risk) and international outsourcing (32% less risk)
Domestic outsourcing increases hazard rate particularly
for lower income groups
- Data
- Method
- Results
- Conclusions
![Page 24: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/24.jpg)
Conclusions (ii)
Probability of finding a new job is lower for woman and
foreign employees
Former employees of firms that outsourced
internationally have about 10% less chance of finding a
new job
- Data
- Method
- Results
- Conclusions
![Page 25: The effects of outsourcing on unemployment...Motivation Outsourcing leads to further fragmentation of the production process (output : value added went from 3.4 to 4.4 in past 20 years)](https://reader033.fdocuments.us/reader033/viewer/2022053018/5f1f83d3446b3b697237366c/html5/thumbnails/25.jpg)
The effects of outsourcing on
unemployment
The Hague, 13 March 2013
Jan Möhlmann
Joint work with Stefan Groot