The Effects of Outsourcing and Outward FDI on Skill Structure in Slovenia: Evidence on Matched Firm-Employee Data

Abstract

This paper studies the effect of outsourcing and outward FDI on firms’ skill structure. Its main contributions consist of studying changes in the skill structure that can be associated with outsourcing and outward FDI to high- and low-income countries, and including a new dimension when defining skills, which also controls for occupational classification of workers. The analysis employs a matched employer-employee dataset for Slovenian manufacturing and service firms between 1997 and 2010. The results indicate that outward FDI to high- and low-income countries has a positive impact on the skill share in manufacturing firms. The results also show that in the case of some occupational groups firms prefer to employ more educated individuals.

Keywords

• skill structure
• fdi
• outsourcing
• skill differentiation
• manufacturing and service firms.