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Offshoring and Immigrant Employment: Firm-level Theory and Evidence

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  • Giorgio Barba Navaretti

    ()
    (University of Milan and Centro Studi Luca d\'Agliano)

  • Giuseppe Bertola

    ()
    (University of Turin)

  • Alessandro Sembenelli

    ()
    (University of Turin)

Abstract

We propose and solve a simple model of firm-level decisions to offshore production stages of lower skill intensity than that of activities that remain in the domestic location. In theory, offshoring is optimal only for the more productive among heterogeneous firms if it entails a fixed cost. In a large sample of Italian firms, offshoring - especially of intermediate production stages - is indeed more prevalent among firms that are larger and more productive, and is predicted by arguably relevant firm-level characteristics. We also document that offshoring decreases the share of unskilled employment in domestic production facilities as well as firms’ propensity to employ immigrant workers, and we discuss the possible determinants and policy implication of the latter finding.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 245.

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Length: 37
Date of creation: 15 Apr 2008
Date of revision:
Handle: RePEc:csl:devewp:245

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References

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  1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development.
  2. Giovanni Peri & Gianmarco I.P. Ottaviano, 2006. "Rethinking the Effects of Immigration on Wages," Working Papers 634, University of California, Davis, Department of Economics.
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  4. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is It Justified?," NBER Working Papers 10808, National Bureau of Economic Research, Inc.
  5. Subhayu Bandyopadhyay & Howard J. Wall, 2005. "Immigration and Outsourcing: A General Equilibrium Analysis," Working Papers 05-08 Classification-, Department of Economics, West Virginia University.
  6. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 907-940, August.
  7. Gianmarco I.P. Ottaviano & Giovanni Peri, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the U.S," NBER Working Papers 11672, National Bureau of Economic Research, Inc.
  8. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  9. Maurice Kugler & Hillel Rapoport, 2005. "Skilled Emigration, Business Networks and Foreign Direct Investment," CESifo Working Paper Series 1455, CESifo Group Munich.
  10. Alexander Hijzen & Holger Görg & Robert C. Hine, 2005. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Economic Journal, Royal Economic Society, vol. 115(506), pages 860-878, October.
  11. Hartmut Egger & Peter Egger, 2000. "Outsourcing and skill-specific employment in a small economy: Austria and the fall of the Iron Curtain," Economics working papers 2000-24, Department of Economics, Johannes Kepler University Linz, Austria.
  12. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
  13. Giovanni Peri & Chad Sparber, 2007. "Task Specialization, Comparative Advantages, and the Effects of Immigration on Wages," NBER Working Papers 13389, National Bureau of Economic Research, Inc.
  14. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  15. Luigi Benfratello & Tiziano Razzolini, 2008. "Firms’ Productivity and Internationalisation Choices: Evidence for a Large Sample of Italian Firms," Development Working Papers 236, Centro Studi Luca d\'Agliano, University of Milano.
  16. Baldwin, Richard & Venables, Anthony J, 1994. "International Migration, Capital Mobility and Transitional Dynamics," Economica, London School of Economics and Political Science, vol. 61(243), pages 285-300, August.
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Cited by:
  1. Gianmarco I.P. Ottaviano & Giovanni Peri & Greg C. Wright, 2010. "Immigration, Offshoring and American Jobs," NBER Working Papers 16439, National Bureau of Economic Research, Inc.
  2. Adolfo Barajas & Ralph Chami & Dalia Hakura & Peter Montiel, 2010. "Workers' Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence," Department of Economics Working Papers 2010-12, Department of Economics, Williams College.
  3. Marina Murat & Barbara Pistoresi & Alberto Rinaldi, 2008. "Italian Diaspora and Foreign Direct Investment: A Cliometric Perspective," Center for Economic Research (RECent) 013, University of Modena and Reggio E., Dept. of Economics.
  4. Andrea Filippo Presbitero & Matteo G. Richiardi & Alessia Amighini, 2012. "Is labor flexibility a substitute to offshoring? Evidence from Italian manafacturing," Mo.Fi.R. Working Papers 72, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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