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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. Alexander Hijzen & Holger Görg & Robert C. Hine, 2005. "International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom," Economic Journal, Royal Economic Society, vol. 115(506), pages 860-878, October.
  2. 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.
  3. Francesco Daveri & Cecilia Jona-Lasinio, 2008. "Off-Shoring and Productivity Growth in the Italian Manufacturing Industries," Working Papers 339, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
  5. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing: Is it Justified?," IMF Working Papers 04/186, International Monetary Fund.
  6. 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.
  7. Kugler, Maurice & Rapoport, Hillel, 2005. "Skilled emigration, business networks and foreign direct investment," Discussion Paper Series In Economics And Econometrics 0503, Economics Division, School of Social Sciences, University of Southampton.
  8. Bandyopadhyay, Subhayu & Wall, Howard J., 2005. "Immigration and Outsourcing: A General Equilibrium Analysis," IZA Discussion Papers 1694, Institute for the Study of Labor (IZA).
  9. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development.
  10. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  11. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  12. 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.
  13. Giovanni Peri & Gianmarco I.P. Ottaviano, 2006. "Rethinking the Effects of Immigration on Wages," Working Papers 634, University of California, Davis, Department of Economics.
  14. 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.
  15. Gianmarco I.P. Ottaviano & Giovanni Peri, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the U.S," NBER Working Papers 11672, National Bureau of Economic Research, Inc.
  16. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 907-940, August.
  17. 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.
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