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Offshoring, Outsourcing, and Production Relocation—Labor-Market Effects in the OECD Countries and Developing Asia

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  • Jacob Funk Kirkegaard

    ()
    (Peterson Institute for International Economics)

Abstract

This working paper evaluates the validity of available data on and the extent of the impact of offshoring on service-sector labor markets in the United States, EU-15, and Japan. A three-tier data validity hierarchy is identified. The impact of offshoring on employment in the three regions is found to be limited. Correspondingly, developing Asia is unlikely to experience large employment gains as a destination region. The paper highlights the case of the Indian IT industry, where the majority of job creation has been in local Indian companies rather than foreign multinationals. Domestic entrepreneurs have played a crucial role in the growth of the Indian IT-related service industry. However, increased tradability of services and associated skill bias in favor of higher skilled workers could have an uneven employment impact on developing Asia. Some high-skilled groups are benefiting and will continue to benefit dramatically from new employment opportunities and rising wage levels. Meanwhile, the same skill bias may eliminate many employment opportunities for unskilled or low-skilled groups in the region. Developing Asian countries therefore face a double educational challenge in the coming years: the need to simultaneously improve both primary aCreation-Date: 2006-06

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Bibliographic Info

Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP07-2.

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Date of creation: Apr 2007
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Handle: RePEc:iie:wpaper:wp07-2

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Keywords: Service Sectors; Offshoring; Production Relocation; Data Source Validity; Automation; Highly Skilled Workers;

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References

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  1. C. Alan Garner, 2004. "Offshoring in the service sector : economic impact and policy issues," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 5-37.
  2. Mihir C. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and the Domestic Capital Stock," NBER Working Papers 11075, National Bureau of Economic Research, Inc.
  3. Falk, Martin, 2001. "The impact of office machinery and computer capital on the demand for heterogeneous labor," ZEW Discussion Papers 01-66, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
  5. Martin Feldstein, 1994. "The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock," NBER Working Papers 4668, National Bureau of Economic Research, Inc.
  6. David Autor & Lawrence Katz & Alan Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," Working Papers 756, Princeton University, Department of Economics, Industrial Relations Section..
  7. Richard B. Freeman, 2006. "Labor market imbalances: shortages, or surpluses, or fish stories?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 51.
  8. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
  9. Ark, Bart van, 2005. "Does the European Union need to revive productivity growth," GGDC Research Memorandum 200575, Groningen Growth and Development Centre, University of Groningen.
  10. Mark A. Planting & Jiemin Guo, 2002. "Increasing the Timeliness of U.S. Annual I-O Accounts," BEA Papers 0022, Bureau of Economic Analysis.
  11. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is It Justified?," NBER Working Papers 10808, National Bureau of Economic Research, Inc.
  12. Jacob Funk Kirkegaard, 2005. "Outsourcing and Offshoring: Pushing the European Model Over the Hill, Rather Than Off the Cliff!," Working Paper Series WP05-1, Peterson Institute for International Economics.
  13. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
  14. Aaditya Mattoo & Sacha Wunsch-Vincent, 2004. "Pre-Empting Protectionism in Services: The GATS and Outsourcing," Journal of International Economic Law, Oxford University Press, vol. 7(4), pages 765-800, December.
  15. William J. Zeile, 2003. "Trade in Goods Within Multinational Companies: Survey-Based Data and Findings for the United States of America," BEA Papers 0033, Bureau of Economic Analysis.
  16. Jacob Funk Kirkegaard, 2005. "Outsourcing and Skill Imports: Foreign High-Skilled Workers on H-1B and L-1 Visas in the United States," Working Paper Series WP05-15, Peterson Institute for International Economics.
  17. David Autor & Frank Levy & Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  18. Catherine L. Mann & Jacob Funk Kirkegaard, 2006. "Accelerating the Globalization of America: The Role for Information Technology," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3900.
  19. Bardhan, Ashok Deo & Kroll, Cynthia, 2003. "The New Wave of Outsourcing," Fisher Center for Real Estate & Urban Economics, Research Reports qt02f8z392, Fisher Center for Real Estate & Urban Economics, UC Berkeley.
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Citations

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Cited by:
  1. Elisa Borghi & Rosario Crinò, 2013. "Service offshoring and wages: worker-level evidence from Italy," LIUC Papers in Economics 264, Cattaneo University (LIUC).
  2. Ghazali, Monia, 2009. "Trade openness and wage inequality between skilled and unskilled workers in Tunisia," Economics Papers from University Paris Dauphine 123456789/12528, Paris Dauphine University.
  3. Pablo, Agnese, 2009. "Japan and her dealings with offshoring: An empirical analysis with aggregate data," MPRA Paper 16505, University Library of Munich, Germany.
  4. Monarch, Ryan & Park, Jooyoun & Sivadasan, Jagadeesh, 2013. "Gains from Offshoring? Evidence from U.S. Microdata," Working Papers 635, Research Seminar in International Economics, University of Michigan.
  5. Nana Bourtchouladze, 2007. "Offshoring and Heterogeneous Firms: One Job Offshored, One Job Lost?," IHEID Working Papers 28-2007, Economics Section, The Graduate Institute of International Studies, revised Dec 2007.
  6. Agnese, Pablo & Ricart, Joan E., 2009. "Offshoring: Facts and figures at the country level," IESE Research Papers D/792, IESE Business School.
  7. Suparna Karmakar, 2008. "An Open Services Regime - Recipe for Jobless Growth?," Macroeconomics Working Papers 22168, East Asian Bureau of Economic Research.
  8. Bank for International Settlements, 2010. "Globalisation, labour markets and international adjustment - Essays in honour of Palle S Andersen," BIS Papers, Bank for International Settlements, number 50, May.

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