Firing at Subcontractors? Spillover Employment Effects of Offshoring in Italy

Using firm-level data for Italy, we address the employment consequences of international production offshoring. We concur with previous literature that offshoring firms’ individual employment performances are no worse than at matching non-offshoring firms. However, offshoring might impart negative spillover effects on subcontracting firms, and this indirect effect might be felt particularly in Italy’s industrial structure (small-sized networked enterprises). To study this, we group firms within their typical subcontracting clusters, identify high offshoring clusters and compare them with a matching low offshoring sample. The evidence that employment performances worsen in the productive clusters with high offshoring supports our conjecture.International outsourcing, multinational firms, employment effects, propensity

Does Offshoring Pay? Firm-Level Evidence From Japan

This paper explores the impact of offshoring, or contracting out of business activities to foreign providers, on firm productivity, using Japanese firm-level data for the period 1994-2000. We find that offshoring has generally a positive effect on productivity growth. This effect is robust to controlling for the possible endogeneity of offshoring with respect to unobserved productivity shocks. Our preferred specification suggests that a one percent increase in offshoring intensity raises productivity growth by 0.17 percent. For the average offshoring firm this implies a 1.8 percent increase in annual productivity growth. These results do not appear to depend much on either the level of technological sophistication of a firms' industry or a firms' international orientation. However, we find that the scope for productivity improvements from offshoring depends negatively on the initial level of productivity of the firm.offshoring, international insourcing, domestic sourcing, TFP

Offshoring: General Equilibrium Effects on Wages, Production and Trade

A simple model of offshoring, which depicts offshoring as ‘shadow migration’, permits harsimonious derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. The model is extended to allow for two-way offshoring between similar nations and to allow for monopolistic competition. We also show that, unlike trade in goods, trade in tasks typically makes all types of workers better off in both the host and home countries (with some proviso).

Offshoring, Labour Market Institutions and the Elasticity of Labour Demand

This paper analyses the evolution of the elasticity of labour demand and the role of offshoring therein using industry-level data for a large number of OECD countries. The first main finding is that the wage elasticity of labour demand has increased substantially. The finding that employment has become increasingly sensitivity to wages is shown to be robust to a wide variety of econometric specifications of labour demand, although some of this association may reflect a trend increase in the speed of adjustment rather than an increase in the long-run wage elasticity. A second finding is that more intensive offshoring is associated with more elastic labour demand, consistent with increased offshoring having expanded the flexibility of firms to adjust the mix of domestic workers and foreign value-added in production when relative factor prices change. More in particular, the average elasticity of labour demand appears to be about 30% to 40% larger in absolute value than the counter-factual elasticity which would have prevailed had offshoring not been possible. Increases of this magnitude might well have important implications for job security and worker bargaining power. Finally, we find some evidence that strict employment protection legislation weakens the link between offshoring and higher labour demand elasticity. This suggests that the impact of offshoring on labour demand elasticity depends on the national institutional environment.Employment protection legislation, international outsourcing, labour demand, worker insecurity

R&D offshoring and the domestic science base in India and China

This paper uses patent and publication data to assess the nature of technological advantages that are attracting R&D offshoring and outsourcing activities to India and China and the possible consequences of such R&D offshoring in increasing domestic innovative capability and building domestic research infrastructure. We find evidence that domestic patenting is concentrated in sectors that are different from sectors of R&D offshoring. Furthermore, whilst the domestic science base (as measured by publications data) in India and China shows strong complementarities in its specialisation profile to that in the US, our data also suggest that the location of international R&D activity in these economies from 1995 may not have strengthened the science base of these economies. Foreign patenting activities in India and China are also marked by a low attachment to the science base.R&D offshoring/internationalisation, Science base, Emerging economies, India and China

Offshoring in the service sector : economic impact and policy issues

The United States continues to run an international trade surplus in services, but business stories frequently appear about service-sector jobs moving offshore. Many Americans are particularly concerned about the loss of skilled, well-paid jobs in such fields as computer programming and accounting. These jobs seemed relatively secure at a time when many manufacturing jobs were being lost to import competition. Similarly, telephone call centers, once viewed as an economic development opportunity in some areas, increasingly are moving to low-wage countries, such as India and the Philippines. Reflecting this growing concern, some members of Congress and state legislators have focused attention on the offshoring of service jobs and production, even introducing legislation to limit the outsourcing of jobs to other countries. Offshoring raises many questions for policymakers and the general public. For example, which service jobs will be affected most by import competition? What are the most likely effects of service-sector offshoring on U.S. output, employment, and, most important, our standard of living? Is offshoring really a problem that requires restrictive government actions, or are other kinds of policies more appropriate to give Americans the highest possible living standard? ; Garner examines the economic effects of offshoring and possible policy responses. He finds that although the offshoring of service jobs hurts some workers, offshoring should not permanently lower U.S. employment or production. ; Moreover, the average living standard can benefit over the long run if the nation adopts policies to retrain displaced workers and move them into expanding industries.Service industries

Developing an African Offshoring Industry—The Case of Nigeria

The purpose of this note1 is to raise awareness of Nigeria’s potential as an African offshoring hub, and it is aimed primarily toward policy makers, potential private sector investors, and development partners. What can Nigeria do to take advantage of the benefits of global trade in services; how can the country brand itself as an offshoring destination for international investors; and what government policies are required to ensure that Nigeria plays a role in the growing ICT offshoring sector?development, Africa, Offshoring, Industry Nigeria, trade in services, investment, ICT, government policies, IT, communications

Offshoring and Specialisation: Are Industries Moving Abroad?

This paper investigates the impact of off-shoring on specialisation via its effect on national endowments and productivity. We use different definition of off-shoring to properly capture international fragmentation of production, while controlling for countries? stocks of R&D and ICT capital. Using industry data for the US, Japan and Europe we show that while offshoring of materials can benefit a wide range of industries, service and intra-industry offshoring can decrease specialisation in high-tech industry, both within manufacturing and services. This effect can be compensated with increasing R&D investments.

International diversification, performance and offshoring : the case of the computer services industry

This article deals with the internationalization process in the computer services industry. It discusses two aspects of internationalization: the relationship between international diversification and firm performances and the new process of offshoring part of the business to low-cost countries. Analysis is based on a proprietary database covering data for the industry's 45 largest companies for the past nine years (1998-2006). It shows that product internationalization has not generated substantial profits for firms that have given priority to international growth. Non sequitur, though precise data is lacking, it seems that it has become common practice over the last five years to outsource parts of the business to subsidiaries in low-cost countries. We do not find any relation between offshoring and profitability or internationalization. The internationalization of process and product seems to be disconnected.computer industry ; services ; internationalization

GLOBAL SOURCING OF SERVICES: HOW WELL ARE THE NEW EU MEMBER STATES COPING WITH THE CHALLENGES? (PART I)

increasingly drawn the attention of economists and politicians, as well as the public. Particularly in the light of the recent waves of EU enlargement these countries have been considered as highly attractive locations for offshored services both from a European and global perspective. While a fairly large amount of anecdotal evidence documents the NMS high potentialities in terms of service offshoring, academic research on this topic is limited. This paper aims to contribute to this discussion. Drawing on recent literature on the complex issue of service globalisation, the paper investigates NMS trade and FDI flows in services over the period 1995-2007 to find evidence of enhanced offshoring-related activities in these countries. The focus is on NMS-10, i.e. NMS-12 excluding Cyprus and Malta. Given the shortcomings of available statistical data and instruments for gauging the scale and impact of services offshoring, the paper adopts a three-tier approach based on BoP trade and FDI statistics, complemented by alternative sources of information. Notwithstanding the caveats associated with this kind of empirical exercise, the paper documents an accelerated pace of offshoring-related activities in the selected NMS, under both forms: international outsourcing and captive offshoring. Its findings show that the fast growing exports in some individual service categories in recent years, coupled with the favourable ongoing changes in the structure and performance of NMS services trade are largely driven by enhanced offshoring activities hosted by their economies. Further, the paper highlights the NMS capabilities to cope with the challenges raised by the increasingly competitive global offshoring landscape, as measured by competitiveness indicators. Finally, the findings of the paper confirm that current anecdotal information and consulting companies-based projections on NMS growing attractiveness as targets of offshoring decisions by TNC originating both inside and outside EU-15 are widely backed up by available statistical data. The paper is organised in two parts under the same title.globalisation, services, international trade, FDI, New EU Member States