International outsourcing and labour demand: Evidence from Finnish firm-level data

Böckerman, Petri and Riihimäki, Elisa (2009): International outsourcing and labour demand: Evidence from Finnish firm-level data.

Abstract

We examine the employment effects of international outsourcing by using firm-level data from the Finnish manufacturing sector. A major advantage of our data is that outsourcing is defined based on firms’ actual use of intermediate inputs from foreign trade statistics. The estimates show that intensive outsourcing (more than two times the 2-digit industry median) does not reduce employment nor have an effect on the share of low-skilled workers.

• Item Type: MPRA Paper
• Language: English
• Keywords: International outsourcing; offshoring; labour demand; propensity score matching
• Subjects: F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions; F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business

References

Abowd, J., and T. Lemieux (1993). The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada. Quarterly Journal of Economics 108: 983-1014.

Ali-Yrkkö, J. (2007). Tuotannon ja T&K-toiminnan ulkoistaminen – motiivit ja onnistuminen. (In Finnish). The Research Institute of the Finnish Economy, Discussion Paper No. 1071.

Ali-Yrkkö, J., and M. Deschryvere (2008). Domestic R&D Employment Effects of Offshoring R&D Tasks: Some Empirical Evidence from Finland. The Research Institute of the Finnish Economy, Discussion Paper No. 1163.

Becker, S., and M.-A. Muendler (2008). The Effect of FDI on Job Security. The B.E. Journal of Economic Analysis and Policy 8: 1-44.

Bertrand, M. (2004). From the Invisible Handshake to the Invisible Hand? How Import Competition Changes the Employment Relationship. Journal of Labor Economics 22: 723-766.

Blinder, A. (2006). Offshoring: The Next Industrial Revolution. Foreign Affairs 85: 113-128.

Boeri, T., G. Nicoletti, and S. Scarpetta (2000). Regulation and Labour Market Performance. CEPR Discussion Paper No. 2420.

Borjas, G., and V. Ramey (1995). Foreign Competition, Market Power, and Wage Inequality. Quarterly Journal of Economics 110: 1075-1110.

Broccolini, C., A. Lo Turco, A.F. Presbitero, and S. Staffolani (2008). Individual Earnings, International Outsourcing and Technological Change: Evidence from Italy. Manuscript.

Burda, M.C. (1999). European Labour Markets and the Euro: How much Flexibility Do We Really Need? CEPR Discussion Paper No. 2217.

Caliendo, M., and S. Kopeinig (2008). Some Practical Guidance for the Implementation of Propensity Score Matching. Journal of Economic Surveys 22: 31-72.

Crinò, R. (2009). Offshoring, Multinationals and Labour Market: A Review of the Empirical Literature. Journal of Economic Surveys 23: 197-249.

Driffill, J., M. Meschi, and A. Ulph (1998). Product Market Integration and Wages: Evidence from a Cross-section of Manufacturing Establishments in the United Kingdom. CEPR Discussion Paper No. 1818.

Egger, H., and P. Egger (2003). Outsourcing and Skill-specific Employment in a Small Economy: Austria after the Fall of the Iron Curtain. Oxford Economic Papers 28: 525-643.

Egger, P., M. Pfaffermayr, and A. Weber (2003). Sectoral Adjustment of Employment: The Impact of Outsourcing and Trade at the Micro Level. IZA Discussion Paper No. 921.

Ekholm, K., and K. Hakkala (2005). The Effect of Offshoring on Labour Demand: Evidence from Sweden. The Research Institute of Industrial Economics, Working Paper No. 654.

Falk, M., and B.M. Koenel (2002). Outsourcing, Imports and Labour Demand. Scandinavian Journal of Economics 104: 567-586.

Feenstra, R.C., and G.H. Hanson (1999). The impact of outsourcing and high-technology capital on wages: Estimates for the U.S., 1972-1990. Quarterly Journal of Economics 114: 907-940.

Frijers, P., and I. Geishecker (2008). International Outsourcing and Job Loss Fears: An Econometric Analysis of Individual Perceptions.

Geishecker, I. (2006). Does Outsourcing to Central and Eastern Europe Really Threaten Manual Workers’ Jobs in Germany? The World Economy 29: 559-583.

Geishecker, I. (2008). The Impact of International Outsourcing on Individual Employment Security: A Micro-level Analysis. Labour Economics 15: 291-314.

Geishecker, I., and H. Görg (2008). Winners and losers: A micro-level analysis of international outsourcing and wages. Canadian Journal of Economics 41: 243-270.

Görg, H., and H. Hanley (2005). Labour Demand Effects of International Outsourcing - Evidence from Firm-level Data. International Review of Economics and Finance 14: 365-376. Haffner, R., S. Nickell, G. Nicoletti, S. Scarpetta, and G. Zoega (2000). European Integration, Liberalisation and Labour Market Performance. In Bertola, G., T. Boeri, and G. Nicoletti (Eds.): Welfare and Employment in a United Europe. Cambridge MA: MIT Press.

Hijzen, A. (2007). International Outsourcing, Technologicial Change, and Wage Inequality. Review of International Economics 15: 188-205.

Hijzen, A., H. Görg, and R.C. Hine (2005). International Outsourcing and the Skill Structure of Labour Demand in the United Kingdom. Economic Journal 115: 861-879.

Hsieh, C.-T., and K.T. Woo (2005). The Impact of Outsourcing to China on Hong Kong’s Labor Market. American Economic Review 95: 1673-1687.

Koskela, E., and R. Stenbacka (2009). Equilibrium Unemployment with Outsourcing Under Labour Market Imperfections. Labour Economics, Forthcoming.

Kramarz, F. (2008). Outsourcing, Unions, Wages, and Employment: Evidence from Data Matching Imports, Firms, and Workers. CREST-INSEE.

Leuven, E., and B. Sianesi (2006). PSMATCH2: Stata Module to Perform Full Mahalanobis and Propensity Score Matching, Common Support Graphing, and Covariate Imbalance Testing. Software, http: //ideas.repec.org/c/boc/bocode/s2432001.html.

Linden, G., K. Kraemer, and J. Dedrick (2007). Who Captures Value in a Global Innovation System? The Case of Apple’s iPod. University of California, Irvine.

Maliranta, M., P. Rouvinen, and A. Airaksinen (2008). IT Outsourcing in Finnish Business. The Research Institute of the Finnish Economy, Discussion Paper No. 1140.

Marin, D. (2006). A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe. Journal of the European Economic Association 6: 612-622.

Munch, J.R., and J.R. Skaksen (2005). Specialization, Outsourcing and Wages. IZA Discussion Paper No. 1907.

Revenga, A. (1992). The Impact of Import Competition on Employment and Wages in U.S. Manufacturing. Quarterly Journal of Economics 107: 255-284.

Wildasin, D.E. (2000). Factor mobility and fiscal policy in the EU: Policy issues and analytical approaches. Economic Policy 31: 337-378.