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The Impact of Immigration on Firm Level Offshoring

Author

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  • Olney , William W.
  • Pozzoli , Dario

    (Department of Economics, Copenhagen Business School)

Abstract

This paper studies the relationship between immigration and offshoring by examining whether an influx of foreign workers reduces the need for firms to relocate jobs abroad. We exploit a Danish quasi-natural experiment in which immigrants were randomly allocated to municipalities using a refugee dispersal policy and we use the Danish employer-employee matched data set covering the universe of workers and firms over the period 1995-2011. Our findings show that an exogenous influx of immigrants into a municipality reduces firm-level offshoring at both the extensive and intensive margins. The fact that immigration and offshoring are substitutes has important policy implications, since restrictions on one may encourage the other. While the multilateral relationship is negative, a subsequent bilateral analysis shows that immigrants have connections in their country of origin that increase the likelihood that firms offshore to that particular foreign country.

Suggested Citation

  • Olney , William W. & Pozzoli , Dario, 2018. "The Impact of Immigration on Firm Level Offshoring," Working Papers 3-2018, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:2018_003
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    Cited by:

    1. Marchal, Léa & Ourens, Guzmán & Sabbadini, Giulia, 2025. "When immigrants meet exporters: A reassessment of the migrant-native wage gap," DICE Discussion Papers 420, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Mann, Katja & Pozzoli, Dario, 2022. "Automation and Low-Skill Labor," IZA Discussion Papers 15791, IZA Network @ LISER.
    3. Britta Glennon, 2020. "How Do Restrictions on High-Skilled Immigration Affect Offshoring? Evidence from the H-1B Program," NBER Working Papers 27538, National Bureau of Economic Research, Inc.
    4. Andreas Hatzigeorgiou & Patrik Karpaty & Richard Kneller & Magnus Lodefalk, 2024. "Immigrant employment and the contract enforcement costs of offshoring," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(3), pages 953-981, August.
    5. Ariu, Andrea, 2022. "Foreign workers, product quality, and trade: Evidence from a natural experiment," Journal of International Economics, Elsevier, vol. 139(C).
    6. Mehra, Mishita & Kim, Daisoon, 2023. "Skilled immigration, offshoring, and trade," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    7. Mann, Katja & Pozzoli, Dario, 2024. "Robots and immigration," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
    8. René Belderbos & Bart Leten & Ngoc Hân Nguyen & Mark Vancauteren, 2025. "Multinational firms and the quest for global talent: Employing (skilled) foreign workers at home and abroad," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 56(2), pages 151-173, March.
    9. Munch, Jakob R. & Olney, William W., 2024. "Offshoring and the Decline of Unions," IZA Discussion Papers 17116, IZA Network @ LISER.
    10. Sharma, Rishi R. & Sparber, Chad, 2024. "Buying lottery tickets for foreign workers: Lost quota rents induced by H-1B policy," Journal of International Economics, Elsevier, vol. 150(C).
    11. Ding, Haoyuan & Fan, Haichao & Jin, Yuying & Qi, Tong, 2022. "Talented overseas returnees and outward foreign direct investment," European Economic Review, Elsevier, vol. 148(C).
    12. Firsin, Oleg, 2023. "How does offshoring affect the wage impact of immigration?," Economic Modelling, Elsevier, vol. 121(C).

    More about this item

    Keywords

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    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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