Trade, outsourcing and skilled to unskilled wage bill ratio in CEECs manufacturing

Abstract

In this paper we investigate whether the outsourcing process in recent years induced a change in wage and employment inequalities between skilled and unskilled workers in the Czech Republic, Hungary and Poland. The outsourcing process is proxied by trade in intermediates and FDI. We analyse the three countries separately and further disentangle the impact of trade in parts and components from that of trade in primary and processed commodities. The main result is that outsourcing from Western to Eastern Europe exerted a different effect on each of the three CEECs. In all countries there is a specialisation in the export of unskilled intensive intermediates and this effect is driven relatively more by parts and components. The latter are also the main force behind the negative effect of intermediate imports in Poland. In this country the increased growth of final goods export exerts a skill biased impact. On the contrary, in Hungary it is the import of parts and components to be skill biased. In the Czech Republic, although intermediate imports are not significant, there is evidence of a positive effect of imported processed goods.