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Offshoring, Inshoring and Labor Market Volatility

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  • Neil Foster-McGregor
  • Johannes Pöschl

Abstract

type="main"> Using sectoral data from the World Input-Output Database, this paper considers the impact of offshoring and inshoring on the volatility of employment and wage growth. Our results indicate that inshoring has a positive impact on sectoral employment volatility, while offshoring has a negative impact. Additional results indicate that much of the positive volatility effect of inshoring is found to occur in countries in East Asia and the EU12, regions that are important destinations for offshoring activities. Conversely, the negative volatility effect of offshoring is found to occur mainly in EU15 and ‘Other’ countries, which consists of developed countries that are relatively intensive offshorers. We also present results to suggest that firms smooth employment fluctuations by offshoring, and that such smoothing tends to be concentrated on low-educated and medium-educated workers.

Suggested Citation

  • Neil Foster-McGregor & Johannes Pöschl, 2015. "Offshoring, Inshoring and Labor Market Volatility," Asian Economic Journal, East Asian Economic Association, vol. 29(2), pages 145-163, June.
  • Handle: RePEc:bla:asiaec:v:29:y:2015:i:2:p:145-163
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    File URL: http://hdl.handle.net/10.1111/asej.12052
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    References listed on IDEAS

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    1. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    2. Diego Comin & Norman Loayza & Farooq Pasha & Luis Serven, 2014. "Medium Term Business Cycles in Developing Countries," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 209-245, October.
    3. Paul R. Bergin & Robert C. Feenstra & Gordon H. Hanson, 2017. "Offshoring and Volatility: Evidence from Mexico’s Maquiladora Industry," World Scientific Book Chapters,in: International Macroeconomic Interdependence, chapter 2, pages 31-44 World Scientific Publishing Co. Pte. Ltd..
    4. Hijzen, Alexander & Swaim, Paul, 2010. "Offshoring, labour market institutions and the elasticity of labour demand," European Economic Review, Elsevier, vol. 54(8), pages 1016-1034, November.
    5. Marcel Timmer & Abdul A. Erumban & Reitze Gouma & Bart Los & Umed Temurshoev & Gaaitzen J. de Vries & I–aki Arto & Valeria Andreoni AurŽlien Genty & Frederik Neuwahl & JosŽ M. Rueda?Cantuche & Joseph , 2012. "The World Input-Output Database (WIOD): Contents, Sources and Methods," IIDE Discussion Papers 20120401, Institue for International and Development Economics.
    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, Oxford University Press, vol. 114(3), pages 907-940.
    7. Neil Foster-McGregor & Robert Stehrer & Gaaitzen Vries, 2013. "Offshoring and the skill structure of labour demand," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(4), pages 631-662, December.
    8. 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.
    9. Marianne Bertrand, 2004. "From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship," Journal of Labor Economics, University of Chicago Press, vol. 22(4), pages 723-766, October.
    10. Mona Haddad & Jamus Jerome Lim & Cosimo Pancaro & Christian Saborowski, 2013. "Trade openness reduces growth volatility when countries are well diversified," Canadian Journal of Economics, Canadian Economics Association, vol. 46(2), pages 765-790, May.
    11. repec:wsi:wschap:9789813225343_0003 is not listed on IDEAS
    12. Paul R. Bergin & Robert C. Feenstra & Gordon H. Hanson, 2017. "Volatility Due to Offshoring: Theory and Evidence," World Scientific Book Chapters,in: International Macroeconomic Interdependence, chapter 3, pages 45-77 World Scientific Publishing Co. Pte. Ltd..
    13. Stephane Pallage & Michel A. Robe, 2003. "On the Welfare Cost of Economic Fluctuations in Developing Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 677-698, May.
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