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Growth gains from offshore outsourcing

Author

Listed:
  • Basu, Anwesha
  • Marjit, Sugata
  • Veeramani, C.

Abstract

We contribute theoretically and empirically to the policy debate on the domestic impact of offshore outsourcing. First, within a simple Ricardian structure, we put forward a growth model where sourcing of foreign inputs by itself, without any transplanted channels, leads to higher growth of domestic industries. Second, by combining country-sector level panel data on production with data on sector level use of imported inputs and input tariffs, we estimate the impact of foreign outsourcing on productivity and output growth. In line with our theoretical model, our analysis confirms that foreign sourcing of inputs exerts a positive effect on growth whereas imported final goods turn out to be insignificant. This has important policy ramifications: removal of trade barriers on intermediate inputs is necessary to boost growth.

Suggested Citation

  • Basu, Anwesha & Marjit, Sugata & Veeramani, C., 2024. "Growth gains from offshore outsourcing," Journal of Policy Modeling, Elsevier, vol. 46(1), pages 90-112.
    • Handle: RePEc:eee:jpolmo:v:46:y:2024:i:1:p:90-112
    DOI: 10.1016/j.jpolmod.2023.11.009
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    More about this item

    Keywords

    Offshoring; Outsourcing; Growth; Intermediate inputs; Gains from trade;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F10 - International Economics - - Trade - - - General
    • F6 - International Economics - - Economic Impacts of Globalization
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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