"Labor market effects of domestic outsourcing: Evidence from legalization in Brazil" - Mayara Felix, Yale University

Feb 9, 12:00 pm – 1:00 pm
Louis A. Simpson International Building, Rm 271


Event Description


We estimate the effect of domestic outsourcing on labor markets using Brazil's 1993 legalization, which sharply increased the outsourcing of security guards. Using a triple-differences design that leverages North-South variation in pre-legalization court permissiveness and compares guards to less affected occupations, we find that outsourcing legalization persistently increased total employment of security guards in more restrictive regions by 8-15% and reduced their average age by two years. In addition, while ensuing layoffs reallocated incumbent security guards to different occupations in lower-wage firms, the average wage of security guards did not fall in more restrictive regions, with some specifications suggesting a small positive effect. This is consistent with a legalization-driven increase in demand for security guards. A simple model implies that the market-level efficiency gains from outsourcing legalization more than offset the earnings losses of incumbent workers.