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Service Offshoring and Productivity: Evidence from the US

Published on Feb 1, 2009in The World Economy1.09
· DOI :10.1111/j.1467-9701.2008.01149.x
Mary Amiti26
Estimated H-index: 26
(Federal Reserve Bank of New York),
Shang-Jin Wei67
Estimated H-index: 67
(Columbia University)
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Abstract
The practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies that have made it possible to trade in some business and computing services that were previously considered non-tradable. This paper estimates the effects of offshoring on productivity in US manufacturing industries between 1992 and 2000. It finds that service offshoring has a significant positive effect on productivity in the United States, accounting for around 10 per cent of labour productivity growth during this period. Offshoring material inputs also have a positive effect on productivity, but the magnitude is smaller accounting for approximately 5 per cent of productivity growth.
  • References (31)
  • Citations (159)
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References31
Newest
Published on Aug 1, 2011in Canadian Journal of Economics
Alexander Hijzen19
Estimated H-index: 19
(OECD: Organisation for Economic Co-operation and Development),
Mauro Pisu16
Estimated H-index: 16
(OECD: Organisation for Economic Co-operation and Development)
+ 1 AuthorsPeter Wright22
Estimated H-index: 22
(University of Sheffield)
We provide the first firm-level evidence of the impact of the trade in producer services (`offshoring') on the labour market. Using a new data set from the UK that measures trade in services at the firm level, we find no evidence that importing intermediate services is associated with job losses or greater worker turnover. Using regression to control for observable differences between firms that import service inputs and those that do not, we show that firms that start importing intermediate ser...
Published on Jan 1, 2009
Mary Amiti26
Estimated H-index: 26
,
Shang-Jin Wei67
Estimated H-index: 67
Published on Mar 31, 2008in Canadian Journal of Economics
Holger Görg51
Estimated H-index: 51
(CAU: University of Kiel),
Aoife Hanley15
Estimated H-index: 15
(CAU: University of Kiel),
Eric Strobl40
Estimated H-index: 40
(École Polytechnique)
We investigate the impact of international outsourcing on productivity using plant level data for Irish manufacturing. Specifically, we distinguish the effect of outsourcing of materials from services inputs. Moreover, we examine whether the impact on productivity is different for plants being more embedded in international markets through exporting or being part of a multinational. Our results show robust evidence for positive effects from outsourcing of services inputs for exporters, either do...
Published on Nov 1, 2007
Alexander Hijzen19
Estimated H-index: 19
,
Mauro Pisu16
Estimated H-index: 16
+ 1 AuthorsPeter Wright22
Estimated H-index: 22
We provide the first firm-level evidence of the impact of the trade in producer services ("offshoring") on the labour market. Using a new dataset which measures trade in services at the firm-level, we find no evidence that importing intermediate services is associated with job losses or greater worker turnover. Using regression and propensity score matching techniques, we show that firms which start importing intermediate services experience faster employment growth than equivalent firms which d...
Published on Jun 1, 2007in National Bureau of Economic Research
Devashish Mitra23
Estimated H-index: 23
(NBER: National Bureau of Economic Research),
Priya Ranjan16
Estimated H-index: 16
(UCI: University of California, Irvine)
In this paper, in order to study the impact of offshoring on sectoral and economywide rates of unemployment, we construct a two sector general equilibrium model in which labor is mobile across the two sectors, and unemployment is caused by search frictions. We find that, contrary to general perception, wage increases and sectoral unemployment decreases due to offshoring. This result can be understood to arise from the productivity enhancing (cost reducing) effect of offshoring. If the search cos...
Published on Apr 1, 2006
Karolina Ekholm15
Estimated H-index: 15
(HHS: Stockholm School of Economics),
Katariina Nilsson Hakkala9
Estimated H-index: 9
(Research Institute of Industrial Economics)
We analyze the effects of offshoring of intermediate input production on labor demand in Sweden, distinguishing between workers with different educational attainments. The econometric results using data for the 1995-2000 period indicate that offshoring — in particular to low-income countries — tends to shift labor demand away from workers with an intermediate level of education. Offshoring to high-income countries, which is the largest component of overall offshoring, does not have any statistic...
Published on Jan 1, 2006
Mary Amiti26
Estimated H-index: 26
(IMF: International Monetary Fund),
Shang-Jin Wei67
Estimated H-index: 67
(THU: Tsinghua University)
The practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies. This paper estimates the effects of offshoring on productivity in US manufacturing industries between 1992 and 2000, using instrumental variables estimation to address the potential endogeneity of offshoring. It finds that service offshoring has a significant positive effect on productivity in the US, accounting for around 11% of productivity growth during this period. Offshoring mat...
Published on Jan 1, 2006in Economic Inquiry1.26
Hartmut Egger22
Estimated H-index: 22
(UZH: University of Zurich),
Peter Egger51
Estimated H-index: 51
(LMU: Ludwig Maximilian University of Munich)
This article presents first insights into the role of international outsourcing on the productivity of low-skilled workers in EU manufacturing. Whereas in the short run international outsourcing exhibits a negative marginal effect on real value added per low-skilled worker, the long-run parameter estimates reveal a positive impact. This may be explained by imperfections in European labor and goods markets, which prohibit an immediate adjustment in the factor employment and the output structure. ...
Published on Jan 1, 2006
Ann E. Harrison39
Estimated H-index: 39
,
Margaret McMillan21
Estimated H-index: 21
,
Clair Null2
Estimated H-index: 2
Critics of globalization claim that firms are being driven by the prospects of cheaper labor and lower labor standards to shift employment abroad. Yet the evidence, beyond anecdotes, is slim. This paper reports stylized facts on the activities of U.S. multinationals at home and abroad for the years 1977 to 1999. We focus on firms in manufacturing and services, two sectors that have received extensive media attention for supposedly exporting jobs. Using firm-level data collected by the Bureau of ...
Published on May 1, 2005in European Economic Review1.71
Mary Amiti26
Estimated H-index: 26
(University of Melbourne)
This Paper analyses the effects of reducing trade costs on the location of manufacturing firms that are vertically linked and differ in factor intensities. I extend the new economic geography literature, by embedding a model with vertical linkages within a Heckscher-Ohlin framework. Firms can choose to locate either in a labour-abundant country or a capital-abundant country. I show that lower trade costs on intermediate inputs and final goods can lead to an agglomeration of all upstream and down...
Cited By159
Newest
Published on Jan 1, 2018
While there is a consensus in the literature that offshoring has a polarising effect on the skill structure of labour demand, little is known about its impact on the capital side. In this paper, we analyse the effect of offshoring on the demand for capital by asset class using a rich country-sector panel dataset. Estimating a system of factor demand equations, we document that offshoring reduces the relative demand for non-ICT capital, thereby also polarising the demand for capital. Our results ...
Published on Aug 9, 2019in Emerging Markets Finance and Trade0.93
Shuzhong Ma (ZJU: Zhejiang University), Yinfeng Liang (ZJU: Zhejiang University), Hongsheng Zhang (ZJU: Zhejiang University)
Published on May 13, 2019in The World Economy1.09
Jan Hagemejer7
Estimated H-index: 7
,
Jakub Muck3
Estimated H-index: 3
(Warsaw School of Economics),
Jakub Mućk
Published on Apr 8, 2019in International Marketing Review3.45
Ruiqin Li (CUFE: Central University of Finance and Economics), Yipeng Liu14
Estimated H-index: 14
(University of Reading),
Oscar F. Bustinza14
Estimated H-index: 14
(UGR: University of Granada)
Purpose The purpose of this paper is to provide a nuanced understanding of international marketing agility by connecting organizational capability literature with that of standardization and adaptation. The focus of the research is to clarify whether managing the tension between product standardization and service customization generates an extra premium in international markets. Design/methodology/approach Two disaggregated Chinese data sets, the Annual Survey of Industrial Enterprises and the ...
Published on Mar 1, 2019in Revista Internacional Del Trabajo
Daniel Chiquiar8
Estimated H-index: 8
(Bank of Mexico),
Martín Tobal (Bank of Mexico), Yslas Renato (Bank of Mexico)
Published on Mar 1, 2019in Journal of International Economics2.22
Peter S. Eppinger3
Estimated H-index: 3
(University of Tübingen)
Major technological advances have recently spurred a new wave of offshoring in services, which used to be non-tradable. Should service workers in developed countries worry about their jobs? Trade theory has given a nuanced answer to this question, suggesting that efficiency gains from offshoring may counteract direct job losses, which leaves the predicted net effect ambiguous. This paper investigates the employment effects of service offshoring in a newly combined and exceptionally detailed pane...
Published on Mar 1, 2019in Structural Change and Economic Dynamics1.56
Begoña Fuster1
Estimated H-index: 1
(University of Alicante),
Adelaida Lillo-Bañuls4
Estimated H-index: 4
(University of Alicante),
Carmen Martínez-Mora1
Estimated H-index: 1
(University of Alicante)
Hightlights • This study analyzes for the first time for Spain the impact of the service offshoring on the employment of the service sector • The data drawn from the Input-Output Tables of Spain’s National Accounts • The empirical analysis is carried out by estimating a labour demand function with constant elasticity of substitution (CES), with panel data methods • The results show that the impact on employment of offshoring services by service industries is not significant and the values obtain...
Published on Feb 1, 2019in Canadian Journal of Economics
Mart ín Tobal1
Estimated H-index: 1
(Bank of Mexico)
This article shows that a skill-abundant country with a relatively high productivity has larger incentives to offshore unskilled than skilled intensive tasks (services), even though no assumption on the correlation between the degree of tradability and skill-intensity of the tasks is made. Assuming putty-clay technology that locks labor into tasks in the short run, it is shown that service offshoring yields wage and employment effects in the long run. These effects switch from negative to positi...
Published on Feb 1, 2019in Journal of Economic Surveys2.76
Leif Van Neuss1
Estimated H-index: 1
(University of Liège)
The main goal of this paper is to provide an integrated survey of the literature devoted to identifying the drivers of structural change, broadly defined as the process of reallocation of economic activity across the three broad sectors agriculture, manufacturing and services. Using the GGDC 10‐Sector Database, this paper first presents the empirical facts associated with structural change in different regions of the world – that is Europe and the USA, Asia, Latin America, and Africa – then revi...