Germany: Outsourcing and job security

Another paper from last week's conference on The Impact of International Competition on Firms and Workers was by Ingo Geishecker from Freie Universität, Berlin. Using a large panel of individual monthly employment spell data from German manufacturing, he finds that international outsourcing, when narrowly defined, has "a marked impact on individual employment security". Here is the abstract for The Impact of International Outsourcing on Individual Employment Security: A Micro-Level Analysis (PDF):

The paper analyzes how international outsourcing affected individual employment security in German manufacturing industri es between 1991 and 2000. The analysis is carried out at the micro-level, combining monthly spell data from the German Socio-Economic Panel and industry-level outsourcing measures. By utilizing micro-level data, problems such as aggregation and potential endogeneity bias, as well as crude skill approximations that regularly hamper industry level displacement studies, can be reduced considerably.

The main finding is that international outsourcing significantly lowers individual employment security. Interestingly, the effect does not differ between high-, medium-, and low-skilled workers. With regard to the observed skill upgrading and high relative unemployment rate of low-skilled workers in Germany the impact of international outsourcing is therefore not related to skill biased displacement but to reduced chances for reentering employment.