Regional employment effects of MNE offshoring (original) (raw)
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Regional employment effects of MNE offshoring 2019-05-09 WP-ORU
2019
The employment in Sweden has become more concentrated to the larger cities in Sweden (Stockholm, Göteborg and Malmö). This paper investigates whether Swedish multinational enterprises (MNEs) have contributed to that development. We examine the association between offshoring within Swedish MNEs and changes their parent employment at regional level (in local labor market regions, LA-regions). The relation may vary depending on: (i) the characteristics of the region (large city, regional center or other region) or (ii) the type of labor (skilled or less-skilled) or the type of job (routine or non-routine) in the parent. Our results reveal large spatial heterogeneities in the relationships between MNE offshoring and onshore employment in various regions. The results suggest that MNE offshoring might be a factor contributing to diverging onshore employment among Swedish regions; increased (unchanged) employment in larger cities and unchanged (decreased) employment in regional centers and...
Offshoring and Relative Labor Demand in Swedish Firms
2007
The objective of this paper is to analyze relative employment effects in Sweden due to offshoring. In contrast to most previous studies in this field, our analysis is based on firm level data. More specifically the dataset contains Swedish manufacturing firms, 1997-2002. In addition we have access to actual firm level import data on intermediate goods and services, respectively. The results show that the relative demand for high skilled labor is positively affected by service offshoring and offshoring of goods to Asia, but negatively affected by offshoring to high income countries. The relative demand for medium skilled labor is negatively affected by offshoring of goods to Eastern Europe, but positively affected by offshoring to high income countries. In contrast to expectations, the results show that the relative demand for low skilled labor is positively affected by offshoring of goods to Eastern Europe. However, these results are related to very small elasticities, which in turn...
Patterns of Employment, Skills, and Tasks within MNEs Associated with Offshoring
The World Economy, 2021
We examine the relationship between relative demands for skills, non-routine, and non-offshorable tasks in Swedish MNE parents (onshore) and their employment shares in affiliates abroad (offshore). Our estimations suggest that increased employment shares in affiliates abroad (offshore) result in higher relative demand for skills and larger shares of non-routine tasks performed by employed that are highly educated in the parents at home (onshore). However, we do not find any evidence for that the share of non-offshorable tasks rises in the parents of Swedish MNEs when employment shares increase in their affiliates overseas. Furthermore, we estimate the relationships between absolute employment onshore (skilled and less-skilled labour) and employment in affiliates offshore (high-and low-income countries). Increased employment in affiliates in lowincome countries relates negatively to the employment of less-skilled workers in manufacturing MNE parents (substitute), whereas increased employment in affiliates in high-income countries correlates positively with the employment of skilled workers in service MNE parents (complement). K E Y W O R D S multinational enterprises, non-routine and offshorable tasks, offshoring, relative labour demand, skill upgrading | 945 ELIASSON et al. 1 | INTRODUCTION Declining costs for transportation and for information and communication, together with lower barriers to international trade and investment, have led to the increased fragmentation of production within global value chains. 1 Multinational enterprises (MNEs) are highly instrumental in such processes. Within MNEs, some production stages of the value chains have been relocated to affiliates offshore (or outsourced to independent suppliers abroad), whereas others have been retained or even expanded in the parents at home (onshore). The purpose of this paper is to examine which activities Swedish MNEs-Swedish-owned enterprise groups with employees abroad −keep in the parents onshore when their affiliates overseas are expanding. In other words, we aim to investigate the relationship between outward foreign direct investment (FDI) and the onshore employment composition of Swedish MNEs. Previous studies, such as Head and Ries (2002) and Hansson (2005), have focused solely on skills measured, e.g. in terms of educational attainment of the employees. We also analyse the skill composition, but in addition, as in Becker et al. (2013), we study the impact of offshoring on the non-routine task content in the MNE parents. Routine tasks are activities accomplished by following a set of specific, well-defined rules, whereas non-routine tasks are more complicated activities, such as problem-solving and decisionmaking. Accordingly, several non-routine tasks may be too complex to be fully communicated to production teams in another country. Routine tasks are thus more easily fragmented geographically than non-routine tasks because they can be simply translated into instructions for the offshore producers. Hence, we expect the share of non-routine tasks to increase in the parents at home when MNEs are expanding their activities abroad. We use two commonly employed measures of the non-routineness of occupations to investigate the relationship between increased offshore activities in the affiliates of Swedish MNEs and the share of non-routine tasks in their onshore MNE parents. The first one, recently put to extensive use 2 but to our knowledge not in this context, is a routine task index of different jobs consisting of three aggregates: manual, routine, and abstract tasks. The second one, proposed and employed by Becker et al. (2013), is based on survey questions concerning whether the respondent workers use a listed workplace tool. A crucial difference between these two measures is that the former acknowledges that in certain middle skilled occupations the element of routine tasks is substantial, e.g. office clerks, and that in some low-skilled occupations the content of nonroutine tasks is considerable, e.g. drivers. Both measures are significantly correlated −especially the second one −with the share of skilled labour (skill intensity) on occupational level. Non-routineness is one factor that can determine the offshorability of a task. Another factor is the extent to which a task requires face-to-face contact with people other than fellow workers with no loss of quality. Blinder and Krueger (2013) define offshorability as: "the ability to perform one's work duties (for the same employer and customers) in a foreign country but still supply the good or service to the home market". This implies that also a variety of tasks carried out by highly skilled workers can possibly be offshored via telecommunication devices, e.g. computer
Labor Demand , Offshoring and Inshoring : Evidence from Swedish Firm-Level Data
2014
The objective of this paper is to analyze effects on firm-level relative demand for skilled labor due to imports of intermediates (offshoring) and exports of intermediates (inshoring). The study is based on a dataset of Swedish manufacturing firms, 1997-2002, using actual trade flows in intermediate goods and services, respectively. Descriptive data show that goods inshoring is much larger than goods offshoring, while the reverse is true for services. There is however a strong increase in services inshoring over the study period. Controlling for potential endogeneity due to high-performing firms self-selecting into offshoring and inshoring, our results indicate that there is a positive effect of services offshoring while inshoring has no significant effect on the skill composition of workers in Swedish firms. JEL Classification: F14; F16
Local Labor Market Effects of Offshoring and Technological Change: Evidence for the Netherlands
2017
This paper studies the effects of technological change and firms' offshoring behavior on employment changes across local labor markets in the Netherlands between 2006 and 2014. The new data on offshoring activities of firms allows us to distinguish business functions and map them to occupations, which closely follows how firms offshore and its links to the labor market outcomes. The unique Regional Database enables us to provide new evidence on the geography of business functions and technological change. It therefore provides a novel analysis for local labor market outcomes of the Netherlands. We combine information from the international sourcing survey with local labor market characteristics to determine the exposure of local areas to offshoring. Adding the data of technological change in terms of recent investment in computerization and R&D by region, new evidence on job composition, technological change and offshoring trends in the Netherlands by local labor markets are provided. By further mapping business functions from international sourcing survey and occupations from labor force survey, we find that offshoring does not play a significant role in affecting local labor market in the Netherlands. It is technological change that plays a major role in reshaping the local labor markets in the Netherlands. In particular, regions that are more exposed to technological change experience a higher average annual growth rate in nonroutine jobs, but a lower average annual growth rate in routine jobs.
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.
National and Sub-National Offshoring Impact on Employment: An Application to Madrid Region
Revista de Estudios Empresariales. Segunda Época, 2016
The effect of delocalization on a national economy has been widely studied, however subnational delocalization remains as an unvisited field for researchers. This paper studies the effects of fragmentation and the subsequent localization outside or abroad on the level of industrial and services employment in Madrid region. We work with Madrid data from regional input-output tables and estimate a labour demand function using panel data. Our results show a significant and small negative effect on regional employment of intra-industrial inputs from the national economy and abroad, while imported inputs from other sectors and origins are complementary to employment, resulting in a positive net effect on employment. The increasing specialization in main activities and the use of external providers by firms have a positive impact on the employment of Madrid region.
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...
Boschma, R., R.H. Eriksson and U. Lindgren (2014) Labour market externalities and regional growth in Sweden. The importance of labour mobility between skill-related industries, Regional Studies, 48 (10), 1669-1690.
This study investigates the relationship between labour market externalities and regional growth based on real labour flows. In particular, it tests for the importance of labour mobility across so-called skill-related industries between 435 four-digit industries within 72 Swedish functional regions (1998–2002). Both the fixed-effect models and generalized method of moments (GMM) estimates demonstrate that a strong intensity of intra-regional labour flows between skill-related industries impacts positively on regional productivity growth, but less so on employment growth. Labour mobility between unrelated industries tends to dampen regional unemployment growth while a high degree of intra-industry labour flows is only found to be associated with rising unemployment.
Offshoring components and their effect on employment: firms deciding about how and where
Applied …, 2011
Firms must take two fundamental decisions: how and where to produce. Traditional measures of offshoring include information on both decisions but cannot distinguish between them. In this paper we attempt to distinguish the evolution of the requirement of inputs per unit of output (how to produce) from the delocalisation of production to others countries (where to produce). We call global technical change to the first element and net offshoring to the second. We further decompose net offshoring into net inter-industry substitution and intra-industrial offshoring (replacement of domestic inputs for imported ones from the same sector). This last measure quantifies better the concept of delocalisation of production to other countries looking for lower costs, the original idea behind offshoring. This decomposition allows us to further investigate on whether it is technical change or net offshoring the main factor in recent Spanish industrial employment changes.