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Can we really trust offshoring indices?

Author

Listed:
  • Davide, Castellani

    () (University of Perugia)

  • De Benedictis, Luca

    () (University of Macerata)

  • Horgos, Daniel

    () (Helmut Schmidt University, Hamburg)

Abstract

This paper argues that indices of (business) service and material offshoring built on sectoral input-output data may actually measure something different than what we think they should. Applying shift-share analysis we decompose the variation over time of a commonly used class of such indices into two components: one related to the intensity in the import of intermediate inputs, and the other associated with the use of such inputs in the production of manufacturing goods. Using data from input-output tables of 21 European countries from 1995 to 2006, we show that in the case of service offshoring, in most countries a larger part of the variance is driven by the raising share of (domestically produced) services used in manufacturing production, while the share of imported services contributes to a much smaller extent. When we focus on the subset of business services, evidence shows a relatively larger tendency towards relying on imported rather domestically produced inputs. Instead, in the case of material offshoring there is evidence that foreign suppliers have substituted domestic ones. However, this pattern is strongest in countries, such as Estonia, Hungary and Slovenia, where incoming multinationals, rather than domestic firms offshoring production may be the driving force.

Suggested Citation

  • Davide, Castellani & De Benedictis, Luca & Horgos, Daniel, 2011. "Can we really trust offshoring indices?," Working Paper 114/2011, Helmut Schmidt University, Hamburg, revised 21 Jun 2011.
  • Handle: RePEc:ris:vhsuwp:2011_114
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    Cited by:

    1. Daniel Horgos & Lucia Tajoli, 2015. "How Offshoring Can Affect the Industries’ Skill Composition," Economies, MDPI, Open Access Journal, vol. 3(2), pages 1-28, May.
    2. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2015. "Offshoring and skilled-unskilled wage gap in selected EU countries (1995–2009)," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 39, pages 151-166.
    3. Schwörer, Tillmann, 2012. "Offshoring, domestic outsourcing, and productivity: Evidence for a number of European countries," Kiel Working Papers 1786, Kiel Institute for the World Economy (IfW).
    4. Tillmann Schwörer, 2013. "Offshoring, domestic outsourcing and productivity: evidence for a number of European countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(1), pages 131-149, March.
    5. Martin Borowiecki & Bernhard Dachs & Doris Hanzl-Weiss & Steffen Kinkel & Johannes Pöschl & Magdolna Sass & Thomas Christian Schmall & Robert Stehrer & Andrea Szalavetz, 2012. "Global Value Chains and the EU Industry," wiiw Research Reports 383, The Vienna Institute for International Economic Studies, wiiw.
    6. Joanna Wolszczak-Derlacz & Aleksandra Parteka, 2016. "The Effects Of Offshoring To Low-Wage Countries On Domestic Wages – A Worldwide Industrial Analysis," GUT FME Working Paper Series A 36, Faculty of Management and Economics, Gdansk University of Technology.

    More about this item

    Keywords

    outsourcing; import penetration; offshoring; index; measurement;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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