Offshoring, Firm Performance and Establishment-Level Employment: Identifying Productivity and Downsizing Effects
AbstractThis paper examines the channels through which offshoring affects employment in a representative sample of German establishments, using a difference-in-differences matching approach. Offshoring establishments are identified by an increase in the share of foreign to total inputs. We find that an average offshoring establishment has higher employment, higher productivity, and higher domestic and foreign market share than if it did not engage in offshoring. Furthermore, its production depth remains unchanged indicating that offshoring predominantly operates through a substitution of domestic for foreign suppliers, rather than through a reduction of home production. This result enables us to isolate a positive productivity effect from offshoring on employment. However, employment in an establishment decreases - relative to its counterfactual - when it simultaneously engages in offshoring and restructuring of the home plant. Therefore, we are also able to isolate a negative downsizing effect of offshoring on employment.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7455.
Date of creation: Sep 2009
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Find related papers by JEL classification:
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-27 (All new papers)
- NEP-EFF-2009-11-27 (Efficiency & Productivity)
- NEP-INT-2009-11-27 (International Trade)
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