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What is the impact of labor displacement on management consulting services?

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  • Edouard Ribes

    (CERNA i3)

Abstract

Labor displacement off-or nearshore is a performance improvement instrument that currently sparks a lot of interest in the service sector. This article proposes a model to understand the consequences of such a decision on management consulting firms. Its calibration on the market of consulting services for the German transportation industry highlights that, under realistic assumptions, labor displacement translates in price decrease by-0.5% on average per year and that for MC practices to remain competitive/profitable they have to at least increase the amount of work they off/nears shore by +0.7% a year.

Suggested Citation

  • Edouard Ribes, 2020. "What is the impact of labor displacement on management consulting services?," Papers 2012.15144, arXiv.org.
    • Handle: RePEc:arx:papers:2012.15144
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    File URL: http://arxiv.org/pdf/2012.15144
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    References listed on IDEAS

    as
    1. Edouard Ribes, 2020. "Organizational sustainability and career frameworks in professional services firms," Economics Bulletin, AccessEcon, vol. 40(1), pages 880-889.
    2. David Autor & David Dorn & Lawrence F Katz & Christina Patterson & John Van Reenen, 2020. "The Fall of the Labor Share and the Rise of Superstar Firms [“Automation and New Tasks: How Technology Displaces and Reinstates Labor”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 645-709.
    3. Clara Xiaoling Chen & Hai Lu & Theodore Sougiannis, 2012. "The Agency Problem, Corporate Governance, and the Asymmetrical Behavior of Selling, General, and Administrative Costs," Contemporary Accounting Research, John Wiley & Sons, vol. 29(1), pages 252-282, March.
    4. Patrizio Pagano & Fabiano Schivardi, 2003. "Firm Size Distribution and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 255-274, June.
    5. D.B. Audretsch & L. Klomp & E. Santarelli & A.R. Thurik, 2004. "Gibrat's Law: Are the Services Different?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 24(3), pages 301-324, May.
    6. Baldwin, Richard & Robert-Nicoud, Frédéric, 2014. "Trade-in-goods and trade-in-tasks: An integrating framework," Journal of International Economics, Elsevier, vol. 92(1), pages 51-62.
    7. Costas Arkolakis & Arnaud Costinot & Dave Donaldson & Andrés Rodríguez-Clare, 2019. "The Elusive Pro-Competitive Effects of Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(1), pages 46-80.
    8. Edouard Ribes, 2020. "Organizational sustainability and career frameworks in professional services firms," Post-Print hal-03052571, HAL.
    9. Royston Greenwood & Stan X. Li & Rajshree Prakash & David L. Deephouse, 2005. "Reputation, Diversification, and Organizational Explanations of Performance in Professional Service Firms," Organization Science, INFORMS, vol. 16(6), pages 661-673, December.
    10. Thomas H. Brush & Philip Bromiley & Margaretha Hendrickx, 2000. "The free cash flow hypothesis for sales growth and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 21(4), pages 455-472, April.
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