Global Production Networks: Labour Market Implications and Policy Challenges

The labour market dimension of global production networks has been extensively examined in the academic literature. The general conclusion is that the effects of offshoring are moderately negative. However, this literature is based on broad definitions of materials and services offshoring. This paper attempts to add to this evidence by examining the phenomenon from two distinctive perspectives. The first is to disaggregate the type of offshoring including both high and low technology materials and services offshoring. The second is to differentiate these impacts across worker skill levels. We find that, unlike previous studies, high technology manufacturing has a large impact on both high and low skilled workers. We also find evidence that there are significant positive spillovers in the demand for services workers from this offshoring. These effects appear to be mainly from offshoring to developing economies and not, as previously found, OECD economies. We further find evidence that these impacts vary by level of sectoral productivity growth and amount of product market regulation found in the domestic economy.