Offshoring Response to High-Skilled Immigration : A Firm-Level Analysis

Using a policy change in the Netherlands in 2012 that made it easier and less costly for firms to employ high-skilled short-stay non-EU workers and a matched employer-employee data, this paper shows that firms in high-skill industries respond by both employing a higher share of non-EU immigrants and increasing the total amount of offshoring to non-EU countries. With reduced costs of hiring short-stay non-EU workers, small firms hire and fire more non-EU workers in a given year. Many of these workers return to their home countries, establishing direct connections that boost offshoring to firms in the Netherlands. Large firms, on the other hand, absorb some of the workers leaving the small firms. These workers also establish connections between their host and origin countries, boosting offshoring.