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Service Offshoring, Productivity and Employment: Evidence from the US

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  • Wei, Shang-Jin
  • Amiti, Mary

Abstract

The practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies. This paper estimates the effects of offshoring on productivity in US manufacturing industries between 1992 and 2000, using instrumental variables estimation to address the potential endogeneity of offshoring. It finds that service offshoring has a significant positive effect on productivity in the US, accounting for around 11% of productivity growth during this period. Offshoring material inputs also has a positive effect on productivity, but the magnitude is smaller accounting for approximately 5% of productivity growth. There is a small negative effect of less than half a percent on employment when industries are finely disaggregated (450 manufacturing industries). However, this affect disappears at more aggregate industry level of 96 industries indicating that there is sufficient growth in demand in other industries within these broadly defined classifications to offset any negative effects.

Suggested Citation

  • Wei, Shang-Jin & Amiti, Mary, 2006. "Service Offshoring, Productivity and Employment: Evidence from the US," CEPR Discussion Papers 5475, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5475
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    References listed on IDEAS

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    More about this item

    Keywords

    Offshoring; Outsourcing; Services; Productivity; Employment;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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