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Service offshoring and firm employment

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  • Eppinger, Peter S.

Abstract

Major technological advances have recently spurred a new wave of offshoring in services, which used to be non-tradable. Should service workers in developed countries worry about their jobs? Trade theory has given a nuanced answer to this question, suggesting that efficiency gains from offshoring may counteract direct job losses, which leaves the predicted net effect ambiguous. This paper investigates the employment effects of service offshoring in a newly combined and exceptionally detailed panel dataset, covering almost the entire universe of German firms' service imports over the years 2002-2013. It exploits firm-specific export supply shocks by partner countries and service types as an instrumental variable to find that service offshoring has increased firm employment. In line with the canonical trade in tasks model, the employment gains are greater in firms with higher initial levels of service offshoring.

Suggested Citation

  • Eppinger, Peter S., 2017. "Service offshoring and firm employment," University of Tuebingen Working Papers in Economics and Finance 103, University of Tuebingen, Faculty of Economics and Social Sciences.
  • Handle: RePEc:zbw:tuewef:103
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    More about this item

    Keywords

    service offshoring; employment; firm-level data; service trade; trade in tasks;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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