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Offshoring, Firm Performance and Establishment-Level Employment: Identifying Productivity and Downsizing Effects

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  • Moser, Christoph
  • Urban, Dieter M
  • Weder di Mauro, Beatrice

Abstract

This 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7455.

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Date of creation: Sep 2009
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Handle: RePEc:cpr:ceprdp:7455

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Keywords: difference-in-differences matching estimator; export performance; offshoring; stable unit treatment value assumption;

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  1. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
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Cited by:
  1. Wrona, Jens & Egger, Hartmut & Kreickemeier, Udo, 2013. "Offshoring Domestic Jobs," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79995, Verein für Socialpolitik / German Economic Association.
  2. Craig P. Aubuchon & Subhayu Bandyopadhyay & Sumon Kumar Bhaumik, 2012. "The extent and impact of outsourcing: evidence from Germany," Review, Federal Reserve Bank of St. Louis, issue July, pages 287-304.
  3. Alessia LO TURCO & Daniela MAGGIONI, 2012. "Does trade foster employment growth in emerging markets? Evidence from Turkey," Working Papers 383, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  4. Joachim Wagner, 2009. "Offshoring and firm performance: Self-selection, effects on performance, or both?," Working Paper Series in Economics 153, University of Lüneburg, Institute of Economics.
  5. Geishecker, Ingo & Riedl, Maximilian & Frijters, Paul, 2012. "Offshoring and job loss fears: An econometric analysis of individual perceptions," Labour Economics, Elsevier, vol. 19(5), pages 738-747.
  6. Ebel Berghuis & Frank A.G. den Butter, . "Labour Market Effects of International Fragmentation of Production; Evidence from a Survey and Case Studies in the Dutch Industry," Tinbergen Institute Discussion Papers 13-136/VI, Tinbergen Institute.
  7. Martin Borowiecki & Bernhard Dachs & Doris Hanzl-Weiss & Steffen Kinkel & Johannes Pöschl & Magdolna Sass & Thomas Christian Schmall & Robert Stehrer & Andrea Szalavetz, 2012. "Global Value Chains and the EU Industry," wiiw Research Reports 383, The Vienna Institute for International Economic Studies, wiiw.
  8. Wright, Greg C., 2014. "Revisiting the employment impact of offshoring," European Economic Review, Elsevier, vol. 66(C), pages 63-83.
  9. Magdolna Sass & Miklos Szanyi, 2012. "Two essays on Hungarian relocations," IEHAS Discussion Papers 1223, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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