Offshoring and the Elasticity of Labour Demand

Abstract

This paper examines the impact of offshoring on labour elasticities for a sample of 40 countries over the period 1995-2009 using the recently compiled World Input-Output Database (WIOD). Including measures of narrow and broad offshoring, as well as indicators of manufacturing and services offshoring, in conditional and unconditional labour demand equations we find that offshoring has an overall neutral or slightly positive effect on employment. This result hides differences across industry types and across employment types however, with additional results indicating a negative effect of services offshoring in many industry types. Positive effects of other offshoring measures are found in high-tech manufacturing and for high-educated employment in particular.

Global Value Chains and Wages: Multi-Country Evidence from Linked Worker-Industry Data

“…However, the global import intensity of production, measured across different GVCs, is considerable, equal to about 30% in 2014, 5 percentage points more than in 2000(Timmer et al 2016: 5). Note that the values given inLos et al (2015b) andTimmer et al (2016) are not directly comparable, as they use different base years and different measures of GVC performance.6 This approach, dividing workers into two categories (high-and low-skilled) or three (high-, medium-and low-skilled) was common in the past, especially in multicounty studies relying on industry-level data on wages or labour demand structure (among others, see:Polgár and Wörz 2010;Lo Turco and Parteka 2011;Foster- McGregor et al 2013;Foster-McGregor et al 2016;Michaels et al 2014; Parteka and Wolszczak-Derlacz 2015; Wolszczak-Derlacz and Parteka 2018).Global Value Chains and Wages: Multi-Country Evidence from Linked...…”

Place‐based policies, firm productivity, and displacement effects: Evidence from Shenzhen, China

“…Surveying international results, Lichter, Peichl, and Siegloch () report average demand elasticities of 0.21 (short‐run) to 0.34 (medium‐run). On the higher end, Foster‐McGregor, Poeschl, and Stehrer () find labor demand elasticities for skilled workers in developing countries of 0.44.…”

Make or Buy: Offshoring of Services Functions in Manufacturing

“…There is evidence that services offshoring has contributed to making hiring and firing more sensitive to changes in wages and other market conditions (Foster-McGregor et al 2013;Hijzen and Swaim 2010), and thus may have had an impact on job security. 10 Finally, cross-country analyses support the finding that offshoring may have contributed to the polarisation of earnings: where the medium-skilled workers have seen their share of the total wage bill decline to the benefit of high-skilled workers andto a less extent-to low-skilled workers (Foster-McGregor et al 2016).…”

“…We follow the practice in previous work and omit this sector from the econometric analysis in Sect. 4 due to measurement problems that are related to sharp fluctuations in oil prices(Foster-McGregor et al 2016).…”