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Business Services Outsourcing: A Firm–level Analysis of Spanish Manufactures

Author

Listed:
  • Ansoategui, Carmen

    (Department of Economics, Finance and Accounting, ESADE, Spain)

  • Chrysanthou, Georgios

    (Department of Economics, University of Dundee, UK.)

  • Guilló, María Dolores

    (Department of Economics, Universidad de Alicante, Spain.)

Abstract

We explore the relationship between outsourced business services and labor at the firm level, using longitudinal data of Spanish manufacturing over the period 1995-2017. We propose a measure for the degree of business services outsourcing based on the fact that (in-house) production of services is a labor intensive activity, and estimate the elasticity of substitution between purchased services and hours worked, controlling for unobserved firm heterogeneity and endogeneity issues. We assess the importance of a technical substitution effect driven by changes in the company’s own relative prices and find that this effect is similar and very significant both in the overall sample and in each industry separately. Moreover, in the overall sample, size has a negative effect on the intensity of business services outsourcing, while the effect of technological sophistication is positive, and the type of industry where the company operates is non-significant. The results are consistent with an unobserved firm productivity term being labor-enhancing.

Suggested Citation

  • Ansoategui, Carmen & Chrysanthou, Georgios & Guilló, María Dolores, 2024. "Business Services Outsourcing: A Firm–level Analysis of Spanish Manufactures," QM&ET Working Papers 24-3, University of Alicante, D. Quantitative Methods and Economic Theory.
    • Handle: RePEc:ris:qmetal:2024_003
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    References listed on IDEAS

    as
    1. Kovach, Jeremy J. & Swink, Morgan & Rodriguez, Mauricio, 2023. "A novel measure of firm-level production outsourcing," International Journal of Production Economics, Elsevier, vol. 263(C).
    2. Jos頃. Fari & Alberto L󰥺 & Ana Mart󻑍arcos, 2014. "Assessing the impact of domestic outsourcing and offshoring on productivity at the firm level," Applied Economics, Taylor & Francis Journals, vol. 46(15), pages 1814-1828, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Firm-level manufacturing; business services outsourcing; production function; elasticity of substitution;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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