Outsourcing, Imports and Labour Demand

Abstract

This paper examines the effects of purchased services and imported intermediate materials on the labour demand for different skills in German manufacturing sectors. We derive and estimate a factor demand system based on the generalised Box-Cox cost function nesting both the normalised quadratic and the translog functional form. We find that the impacts of output and capital growth are more important in explaining the demand for heterogeneous labour than substitution effects between labour and non-labour inputs. Similarly, the increasing use of both imported materials and purchased services is a consequence of output growth rather than input substitution.

Labor demand effects of rising electricity prices: Evidence for Germany

“…There is little prior evidence on unconditional cross-price elasticities between heterogeneous labor and energy for the German case. An exception is the study by Falk and Koebel (2002), which estimates scale elasticities for manufacturing sectors in Germany that are all negative ranging from −0.209 to −0.406 for high skilled labor, −0.053 to −0.082 for medium skilled workers and −0.143 to −0.087 for unskilled labor. Hence, our results are in line with these findings regarding the negative signs across all skill groups and the pattern with highest complementarity between high skilled labor and electricity, a lower complementarity for low skilled workers as well as the weakest relationship for medium skilled labor.…”

“…However, our results are larger in absolute terms, especially for high and low skilled labor. This might be due to the fact that Falk and Koebel (2002) study the effect of total energy prices while we concentrate solely on electricity. Labor is more likely to be substitutable in production processes that include machines (electrical energy), than in production processes that are related with process heat (mainly coal and natural gas).…”

“…In addition, they typically use highly aggregated industrial sector level data and some of them treat labor as an homogeneous input factor and do not differentiate between different skill levels. Kemfert and Welsch (2000) employ a general equilibrium model and use data aggregated to seven sectors (1970)(1971)(1972)(1973)(1974)(1975)(1976)(1977)(1978)(1979)(1980)(1981)(1982)(1983)(1984)(1985)(1986)(1987)(1988), Falk and Koebel (2002) base their estimates on a data set that includes 26 industries over the period [1978][1979][1980][1981][1982][1983][1984][1985][1986][1987][1988][1989][1990] and a Box-Cox cost function. Koebel et al (2003) analyze 31 manufacturing industries for a time span ranging from 1978 to 1990.…”

International outsourcing and the demand for skills

“…Another problem in some of these studies where labour by skill groups and materials are the variable factors and international outsourcing acts as a quasi-fixed factor (like in Hijzen, et.al., 2005) is double counting, because total material inputs already comprise international outsourcing measured by imported materials. There are only few examples in the literature where outsourcing is not treated as an exogenous factor but as a direct substitution process between labour and imported intermediates like Tombazos (1999) and Falk and Koebel (2002). On the other hand progress has been made during the last years in measuring outsourcing.…”

“…Measuring international outsourcing by imported materials inputs at current prices and dealing simultaneously with material inputs as variable factors might have led to biased results in these studies. On the other hand the studies that dealt with outsourcing as a direct substitution process Koebel, 2002 andTombazos, 1999) were not able to use the data on imported material inputs from 1995 on, when large part of the increase in outsourcing to low wage -countries has happened.…”