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Offshoring, Extent of the Shadow Economy and Firm Performance. Evidence from Italy

  • Vito Amendolagine


    (University of bari)

  • Rosa Capolupo

    (University of bari)

  • Giovanni Ferri

    (University of bari)

Being the G-7 country with the largest shadow-economy share, we posit that Italy's manufacturing firms - to counter emerging economies' competition - could alternatively offshore or enter the shadow economy. Within this context, we investigate, in a sample of Italian firms, whether internationalised firms outperform purely domestic firms in terms of efficiency, innovativeness and skill composition. Using propensity-score-matching and difference-in-difference techniques we find evidence that: (i) offshoring impacts TFP negligibly but, (ii) labour cost relocation robustly causes offshoring; (iii) offshoring firms are more likely innovative and R&D-oriented; (iv) firms in high- shadow -economy provinces less likely offshore. It is also evidenced that the latter firms show lower TFP and R&D expenditure.

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Paper provided by Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari in its series series with number 0021.

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Length: 816
Date of creation: Mar 2008
Date of revision: Mar 2008
Handle: RePEc:bai:series:wp0021
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