As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Geneva Graduate Institute is pleased to invite you to a public talk given by Adrien Bilal, Assistant Professor of Economics, Harvard University. We are pleased to host this talk in collaboration with the Geneva Trade and Development Workshop.
He will present his work entitled Outsourcing, Inequality and Aggregate Output, joint with Hugo Lhuillier.
Abstract: Outsourced workers experience large wage declines, yet domestic outsourcing may raise aggregate productivity. To study this equity-efficiency trade-off, we contribute a framework in which multi-worker firms either hire imperfectly substitutable worker types in-house along a wage ladder, or rent labor services from contractors who hire in the same frictional labor markets. Three implications arise. First, selection into outsourcing: more productive firms are more likely to outsource to save on labor costs and higher wage premia. Second, a productivity effect: outsourcing leads firms to raise output and labor demand. Third, an outsourcing wage penalty: contractor firms pay lower wages. We find support for all three implications in French administrative data and rule out alternative explanations. Instrumenting revenue productivity using export demand shocks, we find evidence for selection into outsourcing. Instrumenting outsourcing using variation in occupational exposure, we find evidence for the productivity effect. We confirm the outsourcing wage penalty with a movers design. After structurally estimating the model and validating it against our reduced-form estimates, we find that the rise in outsourcing in France between 1997 and 2016 lowers low skill service worker earnings and welfare by 1.5%. Outsourcing increases labor market sorting, lowers the share of rents going to workers, but raises aggregate output by 6%. A simultaneous 5.5% minimum wage hike stabilizes earnings and maintains employment and output gains.
For those interested, the full paper is available here.
About the speaker
Adrien Bilal is a macroeconomist with interests in labor and spatial economics. Adrien received his PhD in Economics from Princeton University. He is currently an Assistant Professor of Economics at the department of Economics at Harvard University and was a Postdoctoral Fellow at the Becker-Friedman Institute at the University of Chicago.