Offshoring, Firm Performance and Establishment-Level Employment: Identifying Productivity and Downsizing Effects

Dieter Urban, Beatrice Weder di Mauro and Christoph Moser ()

No 7455, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: Difference-in-differences matching estimator; Export performance; Offshoring; Stable unit treatment value assumption (search for similar items in EconPapers)
JEL-codes: C21 F16 F23 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-eff and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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