Labor market effects of cross-border outsourcing through EU enlargement: The case of Germany and the Czech Republic

Project duration: 31.12.2008 to 30.12.2021

Abstract

International outsourcing or offshoring of production and service activities is a widespread phenomenon which is closely related to the process of economic integration when countries with significant wage level differences are involved. The economic consequences especially for the labor market are an issue of an ongoing debate. A central controversial topic concerns the impact of international relocation of production and service activities on net employment as well as the effect of the employment and wage structure in the country of origin and in the target country. Moreover, international outsourcing is likely to influence the interregional allocation of productive resources and wealth. Hence likely winners and losers have to be identified. The project aims at filling an important gap in theoretical and empirical research. The theory has to integrate elements not only from (New) Trade and Labor Market Theory but also from New Economic Geography. The combination of these different approaches opens a fruitful and innovative research agenda from which alternative hypotheses concerning the cited controversies are derived. It is intended to base the empirical investigation on a new – internationally unique – linked employer-employee micro data set for German and Czech regions. The new data will allow in-depth research of integration effects. The project serves as a pilot scheme for further research on economic integration effects in the further course of EU enlargement.