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Offshoring and Immigrant Employment: Firm-level Theory and Evidence

Author

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  • Bertola, Giuseppe
  • Barba Navaretti, Giorgio
  • Sembenelli, Alessandro

Abstract

We propose and solve a simple model of firm-level decisions to offshore production stages of lower skill intensity than that of activities that remain in the domestic location. In theory, offshoring is optimal only for the more productive among heterogeneous firms if it entails a fixed cost. In a large sample of Italian firms, offshoring - especially of intermediate production stages - is indeed more prevalent among firms that are larger and more productive, and is predicted by arguably relevant firm-level characteristics. We also document that offshoring decreases the share of unskilled employment in domestic production facilities as well as firms? propensity to employ immigrant workers, and we discuss the possible determinants and policy implication of the latter finding.

Suggested Citation

  • Bertola, Giuseppe & Barba Navaretti, Giorgio & Sembenelli, Alessandro, 2008. "Offshoring and Immigrant Employment: Firm-level Theory and Evidence," CEPR Discussion Papers 6743, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6743
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    1. Gianmarco I. P. Ottaviano & Giovanni Peri, 2021. "Rethinking The Effect Of Immigration On Wages," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 9, pages 245-290, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Gianmarco I. P. Ottaviano & Giovanni Peri & Greg C. Wright, 2021. "Immigration, Offshoring, and American Jobs," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 10, pages 291-326, World Scientific Publishing Co. Pte. Ltd..
    2. Adolfo Barajas & Ralph Chami & Dalia Hakura & Peter Montiel, 2011. "Workers’ Remittances and the Equilibrium Real Exchange Rate: Theory and Evidence," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 45-99, January.
    3. F. Daveri & C. Jona-Lasinio, 2007. "Off-shoring and productivity growth in the Italian manufacturing industries," Economics Department Working Papers 2007-EP08, Department of Economics, Parma University (Italy).
    4. Giulia Bettin & Alessia Lo Turco & Daniela Maggioni, 2014. "A firm level perspective on migration: the role of extra-EU workers in Italian manufacturing," Journal of Productivity Analysis, Springer, vol. 42(3), pages 305-325, December.
    5. Andrea F. Presbitero & Matteo G. Richiardi & Alessia A. Amighini, 2015. "Is labor flexibility a substitute to offshoring? Evidence from Italian manufacturing," International Economics, CEPII research center, issue 142, pages 81-93.
    6. Bulent Unel, 2019. "A model of occupational choice, offshoring and immigration," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 267-289, February.
    7. Cosimo Beverelli & Gianluca Orefice & Nadia Rocha, 2016. "The Impact of Offshoring and Migration Policies on Migration Flows," Working Papers 2016-21, CEPII research center.
    8. Firsin, Oleg, 2023. "How does offshoring affect the wage impact of immigration?," Economic Modelling, Elsevier, vol. 121(C).
    9. Marina Murat & Barbara Pistoresi & Alberto Rinaldi, 2008. "Italian Diaspora and Foreign Direct Investment: A Cliometric Perspective," Center for Economic Research (RECent) 013, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    10. Simontini Das & Ajitava Raychaudhuri & Saikat Sinha Roy, 2012. "Immigration Versus Outsourcing: A Developing Country¡¯S View," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(2), pages 109-138, June.

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    More about this item

    Keywords

    Outsourcing; Migration; Foreign direct investment; Skilled labour;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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