Employment Effects of Service Offshoring: Evidence from Matched Firms

This paper studies the e¤ects of service o¤shoring on the level and skill composition of domestic employment, using a rich data set of Italian �rms and propensity score matching techniques. The results show that service o¤shoring has no e¤ect on the level of employment but changes its composition in favor of high skilled workers.Service Offshoring; Employment; Skills; Propensity Score Matching; Sensitivity Analysis

Service Offshoring and White-Collar Employment

I study the effects of service offshoring on white-collar employment, using highly disaggregated occupational data for the U.S.. I present a structural model of the firm’s behavior that allows tractable derivation of labor demand elasticities for highly detailed occupations. I estimate the model using Quasi-Maximum Likelihood, to simultaneously account for the high degree of censoring of the employment variable and the small cross-sectional dimension of the panel. I find that service offshoring is skill-biased, because it raises employment among high-skilled occupations and lowers employment among medium- and low-skilled ones. Within each skill group, service offshoring penalizes tradeable occupations and tends to benefit complex non tradeable jobs.service offshoring, white-collar occupations, labor demand elasticities, homothetic weak separability, censored demand system estimation

Imported Inputs and Skill Upgrading

This paper studies the effect of imported inputs on relative skilled labor demand. To this purpose, it uses firm-level data for 27 transition countries and propensity score matching techniques. The results show that importing inputs induces skill upgrading: according to a conservative estimate, it explains roughly one-quarter of the higher share of skilled employment observed at importers. The paper discusses possible mechanisms behind this result. In particular, it reports suggestive evidence that importing may lead firms to engage in skill-intensive activities, such as production of new goods, improvements in product quality and, to a lesser extent, R&D and technology adoption.Imported Inputs; Relative Skilled Labor Demand; Firm-Level Data; Transition Countries; Propensity Score Matching

Service Offshoring and the Skill Composition of Labor Demand

This paper studies the effects of service offshoring on the skill composition of labor demand, using novel comparable data for nine Western European countries between 1990 and 2004. The empirical analysis delivers three main results. First, service offshoring is skill-biased, because it increases the demand for high and medium skilled labor and decreases the demand for low skilled labor. Second, the effects of service offshoring are similar to those of material offshoring, both qualitatively and quantitatively. Third, the economic magnitude of these effects is not large.Offshoring; Labor Demand; Skills

Productivity, Quality, and Export Intensities

We study how firm and foreign market characteristics affect the geographic distribution of exporter' sales. To this purpose, we use export intensities (the ratio of exports to sales) across destinations as our key measures of firms'relative involvement in heterogeneous foreign markets. In a representative sample of Italian manufacturing firms, we find a robust negative correlation between revenue-TFP and export intensity to low-income destinations and, more generally, that the correlations between export intensities and TFP are increasing in per capita income of the foreign destinations. We argue that these (and other) empirical regularities can arise from the interplay between (endogenous) cross-firm heterogeneity in product quality and cross-country heterogeneity in quality consumption. To test this conjecture, we propose a new strategy to proxy for product quality that allows to exploit some unique features of our dataset. Our results strongly suggest that firms producing higher-quality products tend to concentrate their sales in the domestic and other high-income markets.Heterogeneous Firms; Export Intensities; Quality; Technical Efficiency; Total Factor Productivity (TFP)

Productivity, Quality and Export Behavior (Revised version of: Firm-Export Intensity and Productivity, September 2011)

We study, both theoretically and empirically, how export intensity (the ratio of exports to sales) is related to firm productivity. Using a representative sample of Italian manufacturing firms, we find that Total Factor Productivity (TFP) is strongly negatively correlated with export intensity to low-income destinations and uncorrelated with export intensity to high-income destinations, conditional on exporting. To account for these facts, which are not easily predicted by existing heterogeneous-firms models, we extend the Melitz’s (2003) model by allowing for endogenous product quality and for non-iceberg trade costs. Under plausible assumptions, our model predicts that the elasticity of export intensity to productivity is increasing in per capita income of the foreign destinations and decreasing in their distance. We find that these two variables can jointly explain the sign, size and ranking of the TFP elasticities of export intensity across individual foreign destinations.EHeterogeneous Firms; Productivity; Quality; Export Shares; Structural Estimation

New Imported Inputs, New Domestic Products

We study the effects of new imported inputs on the entry of new domestic products and their characteristics. To this purpose, we construct a novel, comprehensive and extremely detailed dataset, which contains product-level information on foreign trade and domestic production for 25 EU countries over 1995-2007. Using these data, we identify new domestic goods and new imported inputs, controlling for all changes in commodity classifications over time. We then show that new imported inputs substantially boost the introduction of new domestic products. We also show that this effect is directly proportional to the quality of new imported inputs and inversely related to their price (conditional on quality). Finally, we document that new products are characterized by higher prices and higher quality relative to existing goods, and that such premia are larger the greater is the use of new imported inputs in production.New Intermediate Inputs; Product Innovation; Input and Output Prices; Input

Service offshoring and white-collar employment

I study the effects of service offshoring on white-collar employment, using highly disaggregated occupational data for the U.S.. I present a structural model of the firm's behavior that allows tractable derivation of labor demand elasticities for highly detailed occupations. I estimate the model using Quasi-Maximum Likelihood, to simultaneously account for the high degree of censoring of the employment variable and the small cross-sectional dimension of the panel. I find that service offshoring is skill-biased, because it raises employment among high-skilled occupations and lowers employment among medium- and low-skilled ones. Within each skill group, service offshoring penalizes tradeable occupations and tends to benefit complex non tradeable jobs

Service Offshoring and White-Collar Employment

This paper empirically studies the effects of service offshoring on white-collar employment, using data for more than one hundred U.S. occupations. A model of firm behavior based on separability allows to derive the labor demand elasticity with respect to service offshoring for each occupation. Estimation is performed with Quasi-Maximum Likelihood, to account for high degrees of censoring in the employment variable. The estimated elasticities are then related to proxies for the skill level and the degree of tradability of the occupations. Results show that service offshoring increases high skilled employment and decreases medium and low skilled employment. Within each skill group, however, service offshoring penalizes tradable occupations and benefits non-tradable occupations.Occupations; Skills; Tradability; Separability; Quasi-Maximum Likelihood

Foreign Direct Investment, Wage Inequality, and Skilled Labor Demand in EU Accession Countries

During the 1990s Poland, Hungary and the Czech Republic have experienced rapid increases in wage inequality between skilled and unskilled workers and received the largest FDI inflow in Central and Eastern Europe. This paper analyzes whether FDI has contributed to the raise in earning inequality via a change in the skill composition of labor demand in the three countries. While we find that in Hungary and the Czech Republic FDI exerts a positive direct impact on the skill-premium, in none of the countries considered FDI has worsened wage inequality by favoring labor demand shifts.Foreign direct investment; Labor demand; Wage inequality