International Outsourcing of Services: What Role for Central and East European Countries?
Central and East European countries (CEECs) that have recently acceded to the European Union are increasingly emerging on the map of global companies as possible locations for outsourcing services. Starting from the assumption of labor cost differentials in favor of the CEECs, the paper explores the CEECs' capacity and potential to supply outsourcable services to the EU-15. We analyze trends in trade flows and foreign direct investment in computer services and other business services. Although the available statistical data are deficient and excessively aggregated, the scattered evidence suggests that the CEECs are important suppliers of outsourcable services to the EU-15. Apart from labor cost differentials, other factors, such as the availability of skilled workforce as well as geographical and cultural proximity, might also contribute to EU-15 companies' preference for the CEECs when deciding on the location for international outsourcing of services. Increased specialization within the enlarged European Union could bring greater benefits from the international outsourcing of services, provided the European Union improves the functioning of labor markets and the competitiveness of the service sector, including the efficient implementation of the internal market for services.
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Volume (Year): 45 (2009)
Issue (Month): 5 (September)
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- Jagdish Bhagwati & Arvind Panagariya, 2004.
"The Muddles over Outsourcing,"
Journal of Economic Perspectives,
American Economic Association, vol. 18(4), pages 93-114, Fall.
- Zeljka Sporer, 2004. "Knowledge-Based Economy and Social Capital in Central and East European Countries," Eastern European Economics, M.E. Sharpe, Inc., vol. 42(6), pages 39-71, November.
- 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.
- Zeljka Sporer, 2004. "Knowledge-Based Economy and Social Capital in Central and East European Countries," Eastern European Economics, Taylor & Francis Journals, vol. 42(6), pages 39-71, November.
- Oecd, 2005. "Potential Offshoring of ICT-intensive Using Occupations," OECD Digital Economy Papers 91, OECD Publishing.
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