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The effects of outsourcing on firm productivity: Evidence from microdata in the Netherlands

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  • Henri de Groot

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  • Jan Möhlmann

Abstract

International outsourcing is an important aspect of economic globalization. Since outsourcing leads to more specialization, it is expected to reduce production costs and to increase productivity. This study uses microdata on Dutch firms to investigate the effects of international and domestic outsourcing on firm productivity at the firm level. It is based on a unique survey on outsourcing covering the period 2001–2006. The survey allows us to distinguish between domestic and international outsourcing and between outsourcing of core and support activities. We study the effects of these different types of outsourcing on labour productivity and total factor productivity (TFP). The results show that, without adjusting for firm size, more productive firms are more likely to outsource. When we adjust for firm fixed effects, the results suggest that international outsourcing of core functions decreased TFP and domestic outsourcing of support functions increased TFP. �

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 250.

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Date of creation: Aug 2013
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Handle: RePEc:cpb:discus:250

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  1. Chad Syverson, 2010. "What Determines Productivity?," NBER Working Papers 15712, National Bureau of Economic Research, Inc.
  2. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
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  13. Frank Butter & Jan Möhlmann & Paul Wit, 2008. "Trade and product innovations as sources for productivity increases: an empirical analysis," Journal of Productivity Analysis, Springer, vol. 30(3), pages 201-211, December.
  14. Gorg, Holger & Hanley, Aoife, 2005. "International outsourcing and productivity: evidence from the Irish electronics industry," The North American Journal of Economics and Finance, Elsevier, vol. 16(2), pages 255-269, August.
  15. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
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  17. Karsten Bjerring Olsen, 2006. "Productivity Impacts of Offshoring and Outsourcing: A Review," OECD Science, Technology and Industry Working Papers 2006/1, OECD Publishing.
  18. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
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