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Outsourcing, productivity, and input composition at the plant level

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  • Catherine J. Morrison Paul
  • Mahmut Yasar

Abstract

We evaluate the productivity and input composition effects of outsourcing (or subcontracting) for Turkish textile and apparel manufacturing plants. We analyze differences in performance indicators for plants that subcontract inputs or outputs, and find that plants that outsource internationally perform better than those that outsource domestically. We evaluate labour productivity gaps and find that more productive plants both initiate outsourcing and subsequently increase their productivity. We then estimate a flexible production function, controlling for simultaneity and selection bias, and find that higher productivity from input subcontracting involves greater skilled labour intensity but the reverse is true for output subcontracting.

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  • Catherine J. Morrison Paul & Mahmut Yasar, 2009. "Outsourcing, productivity, and input composition at the plant level," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 422-439, May.
  • Handle: RePEc:cje:issued:v:42:y:2009:i:2:p:422-439
    DOI: 10.1111/j.1540-5982.2009.01514.x
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    Cited by:

    1. Elisabetta Magnani, 2012. "Vertical disintegration and training: evidence from a matched employer–employee survey," Journal of Productivity Analysis, Springer, vol. 38(2), pages 199-217, October.
    2. Alessia Lo Turco & Daniela Maggioni, 2013. "On the Role of Imports in Enhancing Manufacturing Exports," The World Economy, Wiley Blackwell, vol. 36(1), pages 93-120, January.
    3. Sasan Bakhtiari, 2011. "Size Evolution and Outsourcing: Theory and Evidence from Australian Manufacturing," Discussion Papers 2012-08, School of Economics, The University of New South Wales.
    4. Mahmut Yaşar & Catherine J. Morrison Paul, 2009. "Size and Foreign Ownership Effects on Productivity and Efficiency: An Analysis of Turkish Motor Vehicle and Parts Plants," Review of Development Economics, Wiley Blackwell, vol. 13(4), pages 576-591, November.
    5. Hartmut Egger & Udo Kreickemeier & Jens Wrona, 2017. "Offshoring Domestic Jobs," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 2, pages 27-70, World Scientific Publishing Co. Pte. Ltd..
    6. Ganeshan Wignaraja & Jens Krüger & Anna Mae Tuazon, 2013. "Production Networks, Profits, and Innovative Activity : Evidence from Malaysia and Thailand," Microeconomics Working Papers 23391, East Asian Bureau of Economic Research.
    7. Giuliano Conti & Alessia Lo Turco & Daniela Maggioni, 2014. "Rethinking the import-productivity nexus for Italian manufacturing," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 589-617, November.
    8. Mauro Caselli, 2018. "Do all imports matter for productivity? Intermediate inputs vs capital goods," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 285-311, August.
    9. Başak Dalgıç & Burcu Fazlıoğlu & Deniz Karaoğlan, 2015. "Entry to foreign markets and productivity: Evidence from a matched sample of Turkish manufacturing firms," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(5), pages 638-659, August.
    10. Jingmei Ma & Yibing Ding & Hongyu Jia, 2016. "The Impacts of Japanese and US Outsourcing on Chinese Firms," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 126-137, February.
    11. Antonio Navas & Francesco Serti & Chiara Tomasi, 2020. "The role of the gravity forces on firms’ trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 1059-1097, August.
    12. Bernhard Dachs & Bernd Ebersberger & Steffen Kinkel & Oliver Som, 2015. "The effects of production offshoring on R&D and innovation in the home country," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 9-31, March.
    13. Joachim Wagner, 2011. "Offshoring and firm performance: self-selection, effects on performance, or both?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(2), pages 217-247, June.
    14. Gopinath, Munisamy & Sheldon, Ian M. & Echeverria, Rodrigo, 2007. "Firm Heterogeneity and International Trade: Implications for Agricultural and Food Industries," Trade Issues Papers 9349, International Agricultural Trade Research Consortium.
    15. Davide Antonioli & Massimiliano Mazzanti & Sandro Montresor & Paolo Pini, 2015. "Outsourcing and Firm Productivity in a Specific Local Production System: Evidence from Reggio Emilia (Italy)," Growth and Change, Wiley Blackwell, vol. 46(2), pages 292-320, June.
    16. Lu, Qinan & Du, Xiaodong, 2020. "The Outsourcing Choice of Agricultural Production Tasks: Implications for Food Security - A Multiple-task Based Approach," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304333, Agricultural and Applied Economics Association.
    17. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
    18. Alberto López, 2014. "Outsourcing and firm productivity: a production function approach," Empirical Economics, Springer, vol. 47(3), pages 977-998, November.
    19. Jianmin Tang & Henrique Do Livramento, 2010. "Offshoring And Productivity: A Micro‐Data Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 111-134, June.
    20. International Monetary Fund, 2014. "France: Selected Issues," IMF Staff Country Reports 2014/183, International Monetary Fund.
    21. Crinò, Rosario, 2012. "Imported inputs and skill upgrading," Labour Economics, Elsevier, vol. 19(6), pages 957-969.
    22. Liza Jabbour, 2013. "Market thickness, sunk costs, productivity, and the outsourcing decision: an empirical analysis of manufacturing firms in France," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(1), pages 103-134, February.

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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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