Offshoring of production can have a deep impact on the wages and welfare of workers with different abilities through its effect on technological progress. This column argues that, when labour is sufficiently cheap abroad, firms have incentives to offshore low-skill tasks and invest in skill-biased technologies at home. Over time, however, offshoring raises foreign wages. This increases demand for all firms and makes innovations complementing low-skill workers more profitable. As a result, offshoring can eventually lead to higher wages for everybody and less inequality.
Daron Acemoglu, Gino Gancia, Fabrizio Zilibotti, Tuesday, September 30, 2014
Arik Levinson, Wednesday, September 24, 2014
Pollution emitted by manufacturers has been falling in Europe and the US. A concern with this clean-up is that developed countries have been offshoring the production of pollution-intensive parts and products. This column presents evidence refuting this concern. Using a new approach, the author calculates that almost all of the clean-up in US manufacturing can be explained by technological changes.
Theodore H. Moran, Lindsay Oldenski, Saturday, August 9, 2014
There is indisputable evidence that manufacturing employment as a share of total employment in the US has been declining. This column argues that focusing on employment masks important signs of growth of the manufacturing sector. Using most up-to-date data, the authors reason that the US manufacturing base is growing larger, more productive and competitive. The expansion of operations abroad by US manufacturing multinationals leads to particularly strong increases in economic activity – including creation of greater numbers of high-paying manufacturing jobs – by those same firms in the US domestic economy.
Ursula Fritsch, Holger Görg, Monday, September 23, 2013
Outsourcing is a controversial practice. This column looks at its effects on firm-level innovation in emerging markets. The authors find robust evidence that outsourcing is positively related to various innovation measures. However, outsourcing only leads to increased R&D spending in countries where intellectual-property rights are well-protected.
Bernhard Dachs, Bernd Ebersberger, Steffen Kinkel, Oliver Som, Saturday, September 7, 2013
European offshoring mostly concerns factory jobs, but some worry that innovation will soon follow. This column shows that offshoring firms employ more people in R&D and design, introduce more frequently new products, and invest more frequently in advanced process technologies compared to non-offshoring firms. Concerns that offshoring may hurt innovation because of the lost links between production and product development are not supported by the evidence.
Antonio Accetturo, Anna Giunta, Salvatore Rossi, Saturday, December 15, 2012
Global value chains are increasingly viewed as the new paradigm in international production and trade. This column argues that a firm can perform better if it 'improves' its positioning in the world network by offshoring the production of its intermediates.
Lindsay Oldenski, Tuesday, October 16, 2012
The state of the US middle class has been a key issue this election season as middle-income workers have experienced relative wage losses in the last decade. Skill-biased technology change has previously been identified as a major cause of this polarisation of wages in the US. But this column shows that there is also an empirical link between offshoring by US firms and the polarisation of the US labour market.
Yasuyuki Todo, Sunday, July 15, 2012
Offshoring continues to be a controversial issue in many developed countries. This column provides evidence from Japan and argues that policymakers should not worry too much about the loss of jobs; while unskilled jobs are offshored, they are replaced with skilled jobs, leading to a more productive use of the domestic labour force.
Rachel Griffith, Helen Miller, Laura Abramovsky, Thursday, March 15, 2012
Multinational firms outsourcing or offshoring their operations to developing countries is a problem as old as globalisation. This column looks at the effect on high-skilled labour in the home country. It presents evidence that, on average, when firms start employing high-skilled workers offshore, they also increase the number of this type of worker employed at home.
Giordano Mion, Andrea Ariu, Saturday, February 25, 2012
Services trade has increased dramatically in the last 20 years. This column examines data from Belgium and suggests that the change in IT use does not translate into higher services exports. It argues instead that offshoring is a key factor contributing to the rise of services trade.
Holger Görg, Ingo Geishecker, Christiane Krieger-Boden, Saturday, December 24, 2011
The effects of offshoring on wages remain a hotly debated issue. This column explores the case of UK firms between 1992 and 2004, recognising that offshoring in one particular industry may also affect labour demand in other industries. It suggests that services and materials offshoring increase the wages of high-skilled workers and decreases the wages of low- and medium-skilled workers, thus contributing to a rising wage inequality.
Xiaole Wu, Fuqiang Zhang, Saturday, November 5, 2011
As the global economic downturn grinds on, more companies are acknowledging that labour costs aren’t always the most important factor when deciding where to build their next factory. This column argues that, in times of recession, some companies find that bringing their business home can give them a competitive edge.
Alyson C Ma, Ari Van Assche, Wednesday, May 18, 2011
Why do firms offshore manufacturing to China? This column uses data from China’s processing trade regime to argue that a hidden driver is the country’s geographic proximity to its East Asian neighbours.
Gianmarco I.P. Ottaviano, Giovanni Peri, Greg C Wright, Thursday, November 18, 2010
Manufacturing production and employment in the US has been in decline over recent decades, often with the finger pointed at immigration and globalisation. This column presents evidence from the US between 2000 and 2007 to show that immigrant and native workers are more likely to compete against offshoring than against each other. Moreover, offshoring's productivity gains can spur greater demand for native workers.
Gianmarco I.P. Ottaviano, Giovanni Peri, Greg C Wright, Tuesday, October 26, 2010
Do immigrants take American jobs? Or does increased efficiency in firms that hire immigrants or practice offshoring generate new jobs for US natives? The authors of CEPR Discussion Paper 8078 develop and test a model which measures both the direct impact of offshoring and hiring immigrants on the employment share of US natives and the indirect gains to US natives from the "cost-savings" effect.
Richard Baldwin, Friday, April 23, 2010
Offshoring is one of the most controversial outcomes of globalisation. This column asks whether economists need a new analytic framework to understand it. New research argues that all you need is good old-fashioned trade theory to keep your thinking straight.
Sascha O Becker, Karolina Ekholm, Marc Muendler, Monday, November 9, 2009
How do offshoring firms reshape their domestic workforce? This column, using evidence from German multinationals, shows a positive correlation between offshoring and the firm’s proportion of highly educated workers. Offshoring firms have relatively more domestic jobs involving non-routine and interactive tasks. But offshoring is far from the only explanation for the shift towards more educated employees carrying out more advanced tasks.
Christoph Moser, Dieter M. Urban, Beatrice Weder di Mauro, Saturday, October 31, 2009
Do offshoring firms reduce their domestic employment? This column examines plant-level evidence from Germany, using difference-in-differences matching techniques. It says that the positive productivity effect of offshoring dominates possible downsizing effects, raising domestic employment at the establishment.
Alan S. Blinder, Friday, October 9, 2009
Fear of offshoring may force its way back onto policy agendas soon. This column uses a survey of individual workers to measure the offshorability of particular jobs and says that about 25% of US jobs are offshorable. Surprisingly, routine tasks are not more offshorable but those held by more educated workers are.
Ann Harrison, Avraham Ebenstein, Margaret McMillan, Shannon Phillips, Monday, August 31, 2009
This column revisits the heated debate over international trade, offshoring, and US wages using new data. It says that increased international exchange with low-income countries has depressed US wages. That effect only arose during the 1990s, suggesting a different conclusion about trade, offshoring, and income inequality than the previous round of debate.