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International Outsourcing and Productivity Growth

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  • Martin Falk

Abstract

This study investigates the impact of international outsourcing to low and high income countries on total factor productivity (TFP) growth based on manufacturing industry data for 14 OECD countries for the period 1995-2000. We find that both the broad and narrow measure of international outsourcing of material inputs to low income countries are not significantly related to total factor productivity growth. In contrast, there is significant impact of purchased services from abroad on TFP growth. In particular, purchased services from abroad account for 20 percent of total factor productivity growth in the manufacturing sector in the selected OECD countries.

Suggested Citation

  • Martin Falk, 2012. "International Outsourcing and Productivity Growth," Review of Economics and Institutions, Università di Perugia, vol. 3(1).
  • Handle: RePEc:pia:review:v:3:y:2012:i:1:n:3
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    References listed on IDEAS

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    1. Sourafel Girma & Holger Görg, 2004. "Outsourcing, Foreign Ownership, and Productivity: Evidence from UK Establishment-level Data," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 817-832, November.
    2. Holger Görg & Aoife Hanley & Eric Strobl, 2008. "Productivity effects of international outsourcing: evidence from plant-level data," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 670-688, May.
    3. Egger, Peter & Pfaffermayr, Michael & Wolfmayr-Schnitzer, Yvonne, 2001. "The international fragmentation of Austrian manufacturing: The effects of outsourcing on productivity and wages," The North American Journal of Economics and Finance, Elsevier, vol. 12(3), pages 257-272, November.
    4. Thijs Raa & Edward Wolff, 2001. "Outsourcing of Services and the Productivity Recovery in U.S. Manufacturing in the 1980s and 1990s," Journal of Productivity Analysis, Springer, vol. 16(2), pages 149-165, September.
    5. Karsten Bjerring Olsen, 2006. "Productivity Impacts of Offshoring and Outsourcing: A Review," OECD Science, Technology and Industry Working Papers 2006/1, OECD Publishing.
    6. Hartmut Egger & Peter Egger, 2006. "International Outsourcing and the Productivity of Low-Skilled Labor in the EU," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 98-108, January.
    7. Gorg, Holger & Hanley, Aoife, 2005. "International outsourcing and productivity: evidence from the Irish electronics industry," The North American Journal of Economics and Finance, Elsevier, vol. 16(2), pages 255-269, August.
    8. Mary Amiti & Shang-Jin Wei, 2006. "Service Offshoring and Productivity: Evidence from the United States," NBER Working Papers 11926, National Bureau of Economic Research, Inc.
    9. Sanghoon Ahn & Kyoji Fukao & Keiko Ito, 2008. "Outsourcing in East Asia and its impact on the Japanese and Korean Labour Markets," OECD Trade Policy Papers 65, OECD Publishing.
    10. Falk, Martin & Wolfmayr, Yvonne, 2008. "Services and materials outsourcing to low-wage countries and employment: Empirical evidence from EU countries," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 38-52, March.
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    1. repec:mbr:jmonec:v:8:y:2013:i:1:p:109-139 is not listed on IDEAS

    More about this item

    Keywords

    international outsourcing; purchased services from abroad; total factor productivity growth;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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