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Offshoring and Immigrant Employment: Firm-level Theory and Evidence

  • Giorgio Barba Navaretti


    (University of Milan and Centro Studi Luca d\'Agliano)

  • Giuseppe Bertola


    (University of Turin)

  • Alessandro Sembenelli


    (University of Turin)

We propose and solve a simple model of firm-level decisions to offshore production stages of lower skill intensity than that of activities that remain in the domestic location. In theory, offshoring is optimal only for the more productive among heterogeneous firms if it entails a fixed cost. In a large sample of Italian firms, offshoring - especially of intermediate production stages - is indeed more prevalent among firms that are larger and more productive, and is predicted by arguably relevant firm-level characteristics. We also document that offshoring decreases the share of unskilled employment in domestic production facilities as well as firms’ propensity to employ immigrant workers, and we discuss the possible determinants and policy implication of the latter finding.

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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 245.

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Length: 37
Date of creation: 15 Apr 2008
Date of revision:
Handle: RePEc:csl:devewp:245
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  1. Francesco Daveri & Cecilia Jona-Lasinio, 2008. "Off-Shoring and Productivity Growth in the Italian Manufacturing Industries," CESifo Working Paper Series 2288, CESifo Group Munich.
  2. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
  3. Baldwin, Richard & Venables, Anthony J, 1994. "International Migration, Capital Mobility and Transitional Dynamics," Economica, London School of Economics and Political Science, vol. 61(243), pages 285-300, August.
  4. Subhayu Bandyopadhyay & Howard J. Wall, 2005. "Immigration and Outsourcing: A General Equilibrium Analysis," Working Papers 05-08 Classification-, Department of Economics, West Virginia University.
  5. Ottaviano, Gianmarco I. P. & Peri, Giovanni, 2007. "Rethinking the effects of immigration on wages," HWWI Research Papers 3-8, Hamburg Institute of International Economics (HWWI).
  6. Luigi Benfratello & Tiziano Razzolini, 2008. "Firms’ Productivity and Internationalisation Choices: Evidence for a Large Sample of Italian Firms," Development Working Papers 236, Centro Studi Luca d\'Agliano, University of Milano.
  7. Hijzen, Alexander & Görg, Holger & Hine, Robert C., 2004. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," IZA Discussion Papers 1249, Institute for the Study of Labor (IZA).
  8. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  9. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
  10. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is It Justified?," IMF Working Papers 04/186, International Monetary Fund.
  11. Ottaviano, Gianmarco & Peri, Giovanni, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the US," CEPR Discussion Papers 5226, C.E.P.R. Discussion Papers.
  12. Maurice Kugler & Hillel Rapoport, 2005. "Skilled Emigration, Business Networks and Foreign Direct Investment," CESifo Working Paper Series 1455, CESifo Group Munich.
  13. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  14. repec:tpr:qjecon:v:114:y:1999:i:3:p:907-940 is not listed on IDEAS
  15. Patricio Aroca & William F. Maloney, 2005. "Migration, Trade, and Foreign Direct Investment in Mexico," World Bank Economic Review, World Bank Group, vol. 19(3), pages 449-472.
  16. Hartmut Egger & Peter Egger, 2000. "Outsourcing and skill-specific employment in a small economy: Austria and the fall of the Iron Curtain," Economics working papers 2000-24, Department of Economics, Johannes Kepler University Linz, Austria.
  17. Giovanni Peri & Chad Sparber, 2007. "Task Specialization, Comparative Advantages, and the Effects of Immigration on Wages," NBER Working Papers 13389, National Bureau of Economic Research, Inc.
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