The Wage and Employment Effects of Outsourcing: Evidence From Danish Matched Worker-Firm Data

The authors employ a unique matched worker firm dataset from Denmark to measure how importing and exporting shocks affect wages and employment at the firm and worker level. Using information on the specific products and origin/destination of trade for Danish firms, the authors construct instruments for the extent of importing and exporting that are time varying and exogenous to the firm. The authors find that exogenous shocks to importing at the firm level have a profound effect on the number and composition of employees and worker wages. College educated workers enjoy significant wage gains from an increase in importing while the employment of high school educated workers contracts and wages of workers who remain employed within the firm fall.