Offshoring, domestic outsourcing and productivity: evidence for a number of European countries
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The growth in offshoring and its economic effects have been subject to extensive empirical analysis. Yet, many studies have not distinguished accurately between offshoring, domestic outsourcing, and supplier changes. The present study provides stylized facts on offshoring in Europe between 1995 and 2008 taking into account this distinction. This study shows that service activities have been systematically offshored and outsourced domestically during this period, whereas manufacturing activities have been systematically offshored or moved from domestic to foreign suppliers. Overall the share of internal production has gone down by 4.5 percentage points, which raises the question whether firms have achieved productivity gains through this specialisation effort. Combining industry-level data on offshoring and domestic outsourcing with a firm panel, this study finds that service offshoring and offshoring of non-core manufacturing activities have contributed to an increase in productivity, whereas no statistically significant link is found for offshoring of core manufacturing activities and domestic outsourcing. The estimated productivity gains are found to be driven in particular by the gains of multinational firms.
KeywordsOffshoring Domestic outsourcing Productivity
JEL classificationF23 D24 L24 L60
I am grateful to Holger Görg, to participants of the Aarhus-Kiel-Workshop 2010, the Göttingen Workshop 2011, and the ISGEP Workshop 2011 in Lüneburg for helpful comments. Research for this paper was supported through the European Commission, Research Directorate General as part of the 7th Framework Programme, Theme 8: Socio-Economic Sciences and Humanities, Grant Agreement no: 244552.
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