November 2003

IZA DP No. 921: Sectoral Adjustment of Employment: The Impact of Outsourcing and Trade at the Micro Level

published as 'Sectoral adjustment of employment to shifts in outsourcing and trade: evidence from a dynamic fixed effects multinomial logit model' in: Journal of Applied Econometrics, 2007, 22 (3), 559-580

This paper analyzes the effects of trade and outsourcing on the transition probabilities of employment between sectors, using a dynamic multinomial logit framework with fixed effects. The data contain individual Austrian male workers over the period 1988-2001. Our results strongly support the view that international economic forces are important determinants of labor market turnover. Increases in imports, terms of trade and, especially, in the outsourcing share negatively affect the probability of staying in or changing into the manufacturing sector, even more so for industries with a comparative disadvantage.