The causal effect of institutional quality on outsourcing

Hein Roelfsema () and Yi Zhang

The Journal of International Trade & Economic Development, 2012, vol. 21, issue 6, 895-920

Abstract: We empirically investigate the relationship between institutional quality and outsourcing to developing economies. To examine the within-country time trend, in contrast to previous cross-sectional studies, this article constructs a time-varying industry-based outsourcing proxy for 89 countries over 25 years (1980--2004). The resulting panel data allow us to identify the causal relationship by controlling for the fixed effects and dynamic factors. We find a significant positive effect of local institutional improvements on outsourcing within lower-middle income countries. In low, upper-middle and high income developing countries, institutional quality is not an important determinant of international outsourcing.

Date: 2012
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DOI: 10.1080/09638199.2011.557161

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