Two Dimensions of Convergence: National and International Wage Adjustment Effects of Cross-border Outsourcing in Europe

The paper proposes a distinction between the two dimensions of convergence-<i>within</i> and <i>between</i> countries-when analyzing the impact of cross-border outsourcing on real wage rates in the EU-15 and the CEEC. In the CEEC, international outsourcing has not affected the adjustment of average real wage rates at the manufacturing industry level, but it has led to a closure of the gap within a typical EU economy. Between-country convergence is likewise fostered by cross-border outsourcing, supporting the hypothesis that outsourcing facilitates international factor price equalization. Copyright Blackwell Publishing Ltd 2004..