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Domestic Employment Effects of Offshoring: Empirical Evidence from Finland

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  • Deschryvere, Matthias
  • Kotiranta, Annu

Abstract

This study empirically explores whether the propensity to offshore affects the total domestic employment at the firm level. The analysis is based on a Finnish weighted sample of 652 firms and screens the effect of offshoring different kinds of tasks. Two main channels of offshoring tasks are taken into account : offshore outsourcing and in-house offshoring. The main conclusion is that offshoring can significantly affect the total domestic employment but that the significance and the direction of the effect depend on which kind of offshoring is involved. Our results offer evidence that in both the manufacturing and service sectors offshore outsourcing of services has a positive effect on employment. In addition it was found that the effect of R&D offshoring on the probability to anticipate an increase of total domestic employment depends on the offshoring channel. Offshore outsourcing of R&D has a positive effect on the anticipated domestic employment, whereas in-house offshoring of R&D has a negative effect. Specific for the manufacturing sector is that offshore outsourcing of production also has a negative significant effect. A final conclusion is that only in the service sector does in-house offshoring of services have a negative effect on the probability to anticipate an increase of domestic employment. By dissecting offshoring by tasks and channels the above empirical findings contribute to a better understanding of the aggregate effects of offshoring on domestic employment.

Suggested Citation

  • Deschryvere, Matthias & Kotiranta, Annu, 2008. "Domestic Employment Effects of Offshoring: Empirical Evidence from Finland," Discussion Papers 1166, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:dpaper:1166
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    Cited by:

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    2. Linda Andersson & Patrik Karpaty & Selen Savsin, 2017. "Labour Demand, Offshoring and Inshoring: Evidence from Swedish Firm-level Data," The World Economy, Wiley Blackwell, vol. 40(2), pages 240-274, February.
    3. Petri Böckerman & Elisa Riihimäki, 2009. "International outsourcing and labour demand: Evidence from Finnish firm-level data," Working Papers 252, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    4. Ana Martins & Guida Nogueira & Eva Pereira, 2020. "International Sourcing in Portuguese Companies Evidence from Portuguese Micro Data," GEE Papers 0157, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Dec 2020.
    5. Wagner, Joachim, 2011. "Productivity and International Firm Activities: What Do We Know?," IZA Policy Papers 23, Institute of Labor Economics (IZA).
    6. Svend Greniman Andersen, 2020. "Offshoring Brains? Evidence on the Complementarity between Manufacturing and R&D in Danish Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(4), pages 1315-1342, October.

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    More about this item

    Keywords

    globalization; internationalization; outsourcing; offshoring; job loss; domestic effects; home country effects;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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