Offshoring and Firm Overlap

Stella Capuano, Hartmut Egger (), Michael Koch and Hans-Joerg Schmerer ()

No 6361, CESifo Working Paper Series from CESifo

Abstract: We set up a model of offshoring with heterogeneous producers that captures two empirical regularities of German offshoring firms. There is selection of larger, more productive firms into offshoring. However, the selection is not sharp, and offshoring and non-offshoring firms coexist over a wide range of the revenue distribution. An overlap of offshoring and non-offshoring firms emerges in our model because, in contrast to textbook models of trade with heterogeneous producers, we allow firms to differ in two technology parameters thereby decoupling the offshoring status of a firm from its revenues. In an empirical analysis, we employ firm-level data from Germany to estimate key parameters of the model and show that ignoring the overlap lowers the estimated gains from offshoring by more than 50 percent and, at the same time, exaggerates substantially the importance of the extensive margin for explaining the evolution of German offshoring over the last 25 years.

Keywords: offshoring; heterogeneous firms; firm overlap; quantitative trade model; extensive and intensive margins of offshoring (search for similar items in EconPapers)
JEL-codes: F12 F14 L11 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Offshoring and firm overlap (2017)
Working Paper: Offshoring and Firm Overlap (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6361

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