The labour market effects of offshoring of small and medium-sized firms: micro-level evidence for Germany

Fabian Kreutzer and Wolfram Berger

Applied Economics, 2018, vol. 50, issue 32, 3416-3431

Abstract: Small and medium-sized enterprises (SMEs) are the economic powerhouse of many OECD countries (perhaps most prominently so in Germany). Yet, the labour market dynamics caused by the internationalization of their production activities are largely unexplored. We use survey-based micro-level data for Germany to explore the employment effects of offshoring of SMEs, relying on propensity score matching and difference-in-difference analysis. We find evidence for a downsizing effect in the immediate aftermath of offshoring whereas, initially, job creation is not spurred. In the medium run, we find evidence for a slowing down of employment dynamics of offshoring firms (that tend to belong to the better performing SMEs in Germany) relative to non-offshoring firms. Even though our results do not point to a net employment loss in the medium run, our evidence suggests that offshoring may lead to less jobs being created. This conclusion cannot be confirmed for large companies.

Date: 2018
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DOI: 10.1080/00036846.2017.1420900

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