Offshoring and Specialisation: Are Industries Moving Abroad?

Abstract

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.