Offshoring and Its Effects on the Labour Market and Productivity: A Survey of Recent Literature (original) (raw)

Offshoring: Facts and figures at the country level

Offshoring has received wide attention lately. Its potential effects, mainly to be materialized in employment and productivity dislocations, are yet to be fully assessed. However, some consensus has been attained as to how to proxy its theoretical definition at an aggregate level. Here we review the most conventional indices the economic literature has so far produced, and employ them to provide an overview of the extent of the phenomenon for a group of countries. Contrary to common belief, our data reveal that offshoring is not exclusive to large developed economies. Further, we highlight the continuing prominence of the manufacturing over the services sector, and observe that, while services offshoring is on the rise, it still represents a small fraction of total offshoring. This is not to deny the employment creation brought about by this higher value-added offshoring or its potential to create more jobs in the future.

Offshoring: Facts and Numbers at the Country Level

SSRN Electronic Journal, 2009

O¤shoring has lately received wide attention. Its potential e¤ects, mainly to be materialized in employment and productivity dislocations, are yet to be fully assessed. However, some consensus has been attained as to how to proxy its theoretical de…nition at an aggregate level. Here we review the most conventional indices the economic literature has so far produced, and employ them to provide an overview of the extent of the phenomenon for a group of countries. Contrary to common beliefs, our data reveal that o¤shoring is not exclusive of large developed economies. Further, we highlight the continuing prominence of the manufacturing over the services sector, and observe that while services o¤shoring is on the rise, it still represents a small fraction of total o¤shoring.

Offshoring and Productivity Revisited: A Time-Series Analysis

SSRN Electronic Journal, 2013

Offshoring and Productivity Revisited: A Time-Series Analysis * The subject of offshoring and productivity has not yet received the attention it deserves. Here I propose a simple framework for estimating the contribution of these strategies to the growth rate of labor productivity from a time-series perspective. This framework is then used to assess the impact of offshoring on skill upgrading and the labor share. For both empirical questions I take up the study of a group of Japanese industries during the recent years of slow growth. The results should be interpreted with caution yet clearly suggest that offshoring can improve labor productivity in the Semiconductors industry. Moreover, offshoring is found to be the source of important changes among industries with different skills (skill upgrading) and an important factor behind the fall of the labor share.

Productivity Gains from Offshoring

SSRN Electronic Journal, 2007

A major question in the globalization debate is whether outsourcing and offshoring activities are beneficial to the home country. This paper investigates the effects on productivity and trade from the perspective of transaction costs, using a recent theory on trade in tasks. A production function is estimated for the Netherlands for the period 1972-2001. It suggests that the effect of offshoring manufacturing and services on total factor productivity (TFP) is positive and larger than the effect of R&D on productivity.

The Impact of Offshoring on Home Country’s Employment

Estudos Econômicos (São Paulo)

Although not a recent phenomenon, offshoring has assumed increasing importance in terms of multinational enterprises’ activities, often being the subject of discussion at the political level, especially in more economically developed countries, which tend to suggest that this phenomenon underlies the poor performance of job creation in these economies, contributing to the relocation of jobs. Despite the increasingly numerous and comprehensive studies, findings insist on presenting rather different ideas concerning the effects on home countries’ employment. Therefore, taking into account the lack of relevant work in this area focused on the Portuguese reality, it is pertinent to bridge this gap, positively contributing to the enrichment of the existing literature and to a better understanding of the effects of offshoring on employment in Portugal. Based on a sample of 14 sectors of the manufacturing industry during the 1995-2009 period, our results suggest that offshoring has a posit...

Dispelling Some Myths About Offshoring

Academy of Management Perspectives, 2006

Critics of globalization claim that firms are being driven to shift employment abroad by the prospects of cheaper labor. Yet the evidence for this, beyond anecdotes, is slim. In this article, we review evidence on whether firms that do business in foreign countries are substituting foreign for domestic labor. We review the results of previous studies and present new firm-level evidence showing that, in fact, increases in employment in low-income countries do hurt employment at home. The premise that foreign expansion of U.S. multinationals encourages employment at home is a myth, but the domestic employment costs of offshoring are probably fairly small in magnitude.

Offshoring: General Equilibrium Effects on Wages, Production and Trade

A simple model of offshoring is used to integrate the complex gallery of results that exist in the theoretical offshoring/fragmentation literature. The paper depicts offshoring as 'shadow migration' and shows that this allows straightforward derivation of the general equilibrium effects on prices, wages, production and trade (necessary and sufficient conditions are provided). We show that offshoring requires modification of the four HO theorems, so econometricians who ignore offshoring might reject the HO theorem when a properly specified version held in the data. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. JEL: F02, F12, L22, R11

Offshoring, industry heterogeneity and employment

RePEc: Research Papers in Economics, 2017

Economies and production systems are subject to incessant processes of structural change fuelled by the dynamics of demand, technology and international competition. The increasing international fragmentation of production, also known as "offshoring", is an important element of such a (global in scale) process of structural change having important implications for employment and on the way employment gains and losses are distributed across firms, industries, national economies and components of the labour force. This paper assesses the employment impact of offshoring, in five European countries (Germany, Spain, France, Italy and the United Kingdom), distinguishing between different types of inputs/tasks offshored, different types of offshoring industries and types of professional groups affected by offshoring. Results provide a rather heterogeneous picture of both offshoring patterns and their effects on labour, and the presence of significant differences across industries. Along with this variety of employment outcomes, the empirical evidence suggests that offshoring activities are mainly driven by a cost reduction (labour saving) rationale. This is particularly the case for the manufacturing industry where offshoring is found to exert a negative impact among the less qualified (manual) or more routinized (clerks) types of jobs, while the main difference between high-and low-technology industries has to do with the type of labour tasks that are offshored and the types of domestic jobs that are affected. In hightech industries the negative effects of offshoring on employment are concentrated among the most qualified professional groups (managers and clerks). A specular pattern is found in the case of the low-tech industries where job losses are associated to the offshoring of the least innovative stages of production and manual workers are those most penalised.

Offshoring and the skill structure of labour demand

Review of World Economics, 2013

In this paper we examine the link between international outsourcing -or offshoring -and the skill-structure of labour demand for a sample of 18 countries over the period 1995-2007. The paper uses data from the recently compiled World-Input-Output-Database (WIOD) to estimate a system of variable factor demand equations. Our results indicate that while offshoring has impacted negatively upon all skill-levels the largest impacts have been observed for mediumskilled (and to a lesser extent high-skilled) workers. Such results are consistent with recent evidence indicating that medium-skilled workers have suffered to a greater extent than other skill-types in recent years.

Offshoring and Productivity: A Micro-Data Analysis

Review of Income and Wealth, 2010

Offshoring has become increasingly important for businesses, especially manufacturing firms, to compete in increasingly competitive domestic and international markets. This paper empirically studies the association between offshoring, productivity and plant characteristics by focusing on the geographical dimension of plants' business activities. Using Statistics Canada's Survey of Innovation 2005, which linked to Annual Surveys of Manufacturers, it demonstrates that material offshoring was highly associated with firms' outward-oriented business activities including foreign operation, investing in foreign M&E, and exporting, after controlling for offshoring and operating locations advantages and industry-specific effects. For R&D offshoring, it is found that it was mainly associated with investment in foreign M&E. In addition, this paper shows that material offshoring is positively associated with productivity and that the association is significantly larger for material offshoring to non-U.S. countries than for material offshoring to the U.S. after controlling for the effects of being multinationals, the education level of workers, and plant size.