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Production offshoring and the skill composition of Italian manufacturing firms: a counterfactual analysis

Author

Listed:
  • Roberto Antonietti
  • Davide Antonioli

Abstract

In this work we explore how the international outsourcing of production (offshoring) impacts the skill composition of Italian manufacturing firms. In particular, our aim is to assess if the choice to offshore production activities to cheap-labour countries implies a bias in the employment of skilled workers relative to unskilled workers. Using a balanced panel of firms across the period 1995-2003, we set up a counterfactual analysis in which, by using a difference-in-differences propensity score matching estimator, we compare the dynamics of skill demand for treated and control firms while addressing the possible problem of selection bias. Our results point to identify a "potential" skill bias effect of production offshoring. In particular, we find that treated firms tend to show an upward shift in the skill ratio with respect to the counterfactual sample, but coefficients are not significantly different from zero. When we look at the elements of the skill ratio separately, we find that the skill bias is significantly driven by a fall in the employment of production workers (blue collars), rather than by the increase in the employment of nonproduction workers (white collars), thus providing further evidence on the unskilled labour-saving nature of international outsourcing.

Suggested Citation

  • Roberto Antonietti & Davide Antonioli, 2009. "Production offshoring and the skill composition of Italian manufacturing firms: a counterfactual analysis," Openloc Working Papers 0903, Public policies and local development.
  • Handle: RePEc:trn:utwpol:0903
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    File URL: http://www.openloc.eu/cms/storage/openloc/working_papers/2009/AntoniettiAntonioli2009.pdf
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    References listed on IDEAS

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    1. Blomstrom, Magnus & Fors, Gunnar & Lipsey, Robert E, 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," Economic Journal, Royal Economic Society, vol. 107(445), pages 1787-1797, November.
    2. Giorgio Barba Navaretti & Enrico Santarelli & Marco Vivarelli, 2002. "The role of subsidies in promoting Italian joint ventures in least developed and transition economies," Applied Economics, Taylor & Francis Journals, vol. 34(12), pages 1563-1569.
    3. Holger Görg & Aoife Hanley, 2004. "Does Outsourcing Increase Profitability?," The Economic and Social Review, Economic and Social Studies, vol. 35(3), pages 267-288.
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    Cited by:

    1. Colin Davis & Alireza Naghavi, 2011. "Offshoring Production: A Simple Model Of Wages, Productivity, And Growth," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 334-348, April.
    2. Crinò, Rosario, 2010. "Employment effects of service offshoring: Evidence from matched firms," Economics Letters, Elsevier, vol. 107(2), pages 253-256, May.

    More about this item

    Keywords

    production offshoring; skill-bias; difference-in-differences; propensity score matching;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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