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Downstream Offshoring and Firm-level Employment

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  • B. MERLEVEDE

  • BERNHARD MICHEL

Abstract

When engaging in offshoring, firms import not only intermediates they used to produce in‐house but also intermediates they previously sourced from non‐affiliated domestic suppliers. This leads to a negative demand shock for the latter. We label this demand shock “downstream offshoring” and develop a novel measure capturing its extent for a firm in a given upstream industry. According to our instrumental variables estimations for a rich sample of Belgian manufacturing firms for the period of 1997 to 2007, downstream offshoring has a robust negative effect on employment. Délocalisation en aval et emploi au niveau des entreprises. Dans le cadre de l’internationalisation de leurs processus de production, les entreprises augmentent leurs importations d’inputs intermédiaires pour remplacer non seulement des inputs qu’elles produisent en interne mais aussi des inputs achetés auprès de fournisseurs domestiques non‐affiliés. Cela entraîne un choc de demande négatif pour ces derniers. Nous avons appelé ce choc délocalisation en aval et développé un indicateur permettant de mesurer son importance pour des firmes dans un secteur en amont. Basées sur un large échantillon d’entreprises du secteur manufacturier pour les années 1997–2007 et utilisant des variables instrumentales, nos estimations montrent que les chocs de délocalisation en aval ont un effet négatif robuste sur l’emploi.
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Suggested Citation

  • B. Merlevede & Bernhard Michel, 2014. "Downstream Offshoring and Firm-level Employment," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 14/880, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:14/880
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    File URL: http://wps-feb.ugent.be/Papers/wp_14_880.pdf
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    Cited by:

    1. Sabien Dobbelaere & Catherine Fuss & Mark Vancauteren, 2022. "Does offshoring shape labor market imperfections? A comparative analysis of Belgian and Dutch firms," Working Paper Research 425, National Bank of Belgium.
    2. Povilas Lastauskas, 2022. "Lockdown, employment adjustment, and financial frictions," Small Business Economics, Springer, vol. 58(2), pages 919-942, February.
    3. Bruno Merlevede & Angelos Theodorakopoulos, 2016. "Productivity effects from inter-industry offshoring and inshoring: Firm-level evidence from Belgium," FIW Working Paper series 165, FIW.
    4. Zouheir El-Sahli & Joakim Gullstrand & Karin Olofsdotter, 2022. "The external effects of offshoring on job security in SMEs," Small Business Economics, Springer, vol. 59(4), pages 1613-1640, December.

    More about this item

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business

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