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The effects of outsourcing on firm productivity: Evidence from microdata in the Netherlands

  • Henri de Groot

    ()

  • Jan Möhlmann

International outsourcing is an important aspect of economic globalization. Since outsourcing leads to more specialization, it is expected to reduce production costs and to increase productivity. This study uses microdata on Dutch firms to investigate the effects of international and domestic outsourcing on firm productivity at the firm level. It is based on a unique survey on outsourcing covering the period 2001–2006. The survey allows us to distinguish between domestic and international outsourcing and between outsourcing of core and support activities. We study the effects of these different types of outsourcing on labour productivity and total factor productivity (TFP). The results show that, without adjusting for firm size, more productive firms are more likely to outsource. When we adjust for firm fixed effects, the results suggest that international outsourcing of core functions decreased TFP and domestic outsourcing of support functions increased TFP. �

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 250.

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Date of creation: Aug 2013
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Handle: RePEc:cpb:discus:250
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  1. Antràs, Pol & Helpman, Elhanan, 2004. "Global Sourcing," CEPR Discussion Papers 4170, C.E.P.R. Discussion Papers.
  2. Henk Kox & Hugo Rojas-Romagosa, 2010. "Exports and Productivity Selection Effects for Dutch Firms," De Economist, Springer, vol. 158(3), pages 295-322, September.
  3. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  4. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
  5. 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.
  6. James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
  7. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-65, June.
  8. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
  9. repec:hrv:faseco:4784029 is not listed on IDEAS
  10. Karsten Bjerring Olsen, 2006. "Productivity Impacts of Offshoring and Outsourcing: A Review," OECD Science, Technology and Industry Working Papers 2006/1, OECD Publishing.
  11. 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.
  12. Ilke Van Beveren, 2007. "Total factor productivity estimation: A practical review," LICOS Discussion Papers 18207, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  13. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  14. Katharine G. Abraham & Susan K. Taylor, 1993. "Firms' Use of Outside Contractors: Theory and Evidence," NBER Working Papers 4468, National Bureau of Economic Research, Inc.
  15. Frank Butter & Jan Möhlmann & Paul Wit, 2008. "Trade and product innovations as sources for productivity increases: an empirical analysis," Journal of Productivity Analysis, Springer, vol. 30(3), pages 201-211, December.
  16. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
  17. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
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