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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. Sourafel Girma & Holger Görg, 2003. "Outsourcing, Foreign Ownership and Productivity: Evidence from UK Establishment Level Data," Discussion Papers of DIW Berlin 361, DIW Berlin, German Institute for Economic Research.
  2. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
  3. Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
  4. Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
  5. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  6. 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.
  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. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-65, June.
  9. Mark Doms & Eric J. Bartelsman, 2000. "Understanding Productivity: Lessons from Longitudinal Microdata," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 569-594, September.
  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. Kox, Henk L.M. & Rojas Romasgosa, Hugo, 2010. "Exports and productivity selection effects for Dutch firms," MPRA Paper 24390, University Library of Munich, Germany.
  12. Ilke Van Beveren, 2012. "Total Factor Productivity Estimation: A Practical Review," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 98-128, 02.
  13. 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.
  14. 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.
  15. repec:dgr:uvatin:20090021 is not listed on IDEAS
  16. 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.
  17. repec:hrv:faseco:4784029 is not listed on IDEAS
  18. 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.
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