Working Paper: CEPR ID: DP7455
Authors: Christoph Moser; Dieter M. Urban; Beatrice Weder Di Mauro
Abstract: This paper examines the channels through which offshoring affects employment in a representative sample of German establishments, using a difference-in-differences matching approach. Offshoring establishments are identified by an increase in the share of foreign to total inputs. We find that an average offshoring establishment has higher employment, higher productivity, and higher domestic and foreign market share than if it did not engage in offshoring. Furthermore, its production depth remains unchanged indicating that offshoring predominantly operates through a substitution of domestic for foreign suppliers, rather than through a reduction of home production. This result enables us to isolate a positive productivity effect from offshoring on employment. However, employment in an establishment decreases - relative to its counterfactual - when it simultaneously engages in offshoring and restructuring of the home plant. Therefore, we are also able to isolate a negative downsizing effect of offshoring on employment.
Keywords: Offshoring; Firm Performance; Employment; Productivity; Downsizing
JEL Codes: C21; F16; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| offshoring (F23) | employment (J68) |
| offshoring (F23) | labor productivity (J24) |
| labor productivity (J24) | employment (J68) |
| offshoring + restructuring (F23) | employment (J68) |
| productivity gains (O49) | employment (J68) |