In the last decades the world economy has seen firms organise production into global value chains, decentralise their systems of command to incentivise workers, and start compensating CEOs with skyrocketing earnings. This column uses new data on German and Austrian firms to show that managerial offshoring to eastern Europe has increased decentralised management by 6.8% in relatively open sectors, but it has lowered the relative wages of executives in Germany and Austria by 4.9%.
Dalia Marin , Jan Schymik, Alexander Tarasov, 19 March 2016
Sascha Becker, Marc Muendler, 06 February 2016
Offshoring and global value chains have reshaped global trade patterns. This column describes how the German economy has been exposed to significant offshoring for at least three decades. The authors find an increasing importance of high-end tasks in the country. Organising and consulting activities under deadlines, changing business conditions, and tougher performance standards are an increasingly common reality in German workplaces. Labour market institutions in German trade partners are largely unrelated to the changing content of German imports.
Joonhyung Lee, 20 December 2015
Globalisation in the form of offshoring can impact the domestic labour market. This column investigates how offshoring affects workers based on their contract type. The findings indicate that the wages of South Korean manufacturing workers increase as offshoring increases, but that this impact is significantly weaker for temporary workers. One potential channel for globalisation to exacerbate inequality is therefore the contract type.
Juan Carluccio, Alejandro Cuñat, Harald Fadinger, Christian Fons-Rosen, 14 December 2015
The increase in the skill premium – wages of skilled workers relative to unskilled workers – has prompted research on its causes and potential remedies. This column presents new evidence suggesting that the impact of globalisation on the income distribution in industrialised countries is much stronger than initially thought. The productivity gains from having access to cheaper inputs through offshoring are not being distributed equally between the different economic actors in our rich societies.
Luisa Gagliardi, Simona Iammarino, Andrés Rodríguez-Pose, 05 November 2015
Offshoring has risen in all advanced economies in recent years. This column analyses the impact of offshoring trends in the UK, where offshoring in services has followed the abundant offshoring in manufacturing, by uncovering their spatial implications. The impact of offshoring in places more exposed to such trends has been significantly negative on routine occupations. On the other hand, when investment abroad targeted developing economies, the effect on job creation in non-routine occupations was positive.
Gianmarco Ottaviano, Giovanni Peri, Greg Wright, 17 June 2015
International trade in services and immigration are among the fastest growing aspects of globalisation. Using UK data, this column explores the links between these phenomena. Immigrants promote exports of final services to their home countries, while also reducing imports for some intermediate services, and bringing productivity gains to the labour market. In designing immigration policies, it is important that the potential impact on exports and offshoring activities are carefully considered.
Emily Blanchard, Xenia Matschke, 30 April 2015
Recent decades have witnessed a dramatic shift in the nature of world trade brought about by the unbundling of international production. One implication is that lobbying by a nation’s firms can be partly influenced by a desired to protect their production facilities abroad. This column presents evidence that US imports from countries and industries with greater offshoring activity by US multinationals face distinctly lower trade barriers.
Daron Acemoglu, Gino Gancia, Fabrizio Zilibotti, 30 September 2014
Offshoring of production can have a deep impact on the wages and welfare of workers with different abilities through its effect on technological progress. This column argues that, when labour is sufficiently cheap abroad, firms have incentives to offshore low-skill tasks and invest in skill-biased technologies at home. Over time, however, offshoring raises foreign wages. This increases demand for all firms and makes innovations complementing low-skill workers more profitable. As a result, offshoring can eventually lead to higher wages for everybody and less inequality.
Arik Levinson, 24 September 2014
Pollution emitted by manufacturers has been falling in Europe and the US. A concern with this clean-up is that developed countries have been offshoring the production of pollution-intensive parts and products. This column presents evidence refuting this concern. Using a new approach, the author calculates that almost all of the clean-up in US manufacturing can be explained by technological changes.
Theodore Moran, Lindsay Oldenski, 09 August 2014
There is indisputable evidence that manufacturing employment as a share of total employment in the US has been declining. This column argues that focusing on employment masks important signs of growth of the manufacturing sector. Using most up-to-date data, the authors reason that the US manufacturing base is growing larger, more productive and competitive. The expansion of operations abroad by US manufacturing multinationals leads to particularly strong increases in economic activity – including creation of greater numbers of high-paying manufacturing jobs – by those same firms in the US domestic economy.
Ursula Fritsch, Holger Görg, 23 September 2013
Outsourcing is a controversial practice. This column looks at its effects on firm-level innovation in emerging markets. The authors find robust evidence that outsourcing is positively related to various innovation measures. However, outsourcing only leads to increased R&D spending in countries where intellectual-property rights are well-protected.
Bernhard Dachs, Bernd Ebersberger, Steffen Kinkel, Oliver Som, 07 September 2013
European offshoring mostly concerns factory jobs, but some worry that innovation will soon follow. This column shows that offshoring firms employ more people in R&D and design, introduce more frequently new products, and invest more frequently in advanced process technologies compared to non-offshoring firms. Concerns that offshoring may hurt innovation because of the lost links between production and product development are not supported by the evidence.
Antonio Accetturo, Anna Giunta, Salvatore Rossi, 15 December 2012
Global value chains are increasingly viewed as the new paradigm in international production and trade. This column argues that a firm can perform better if it 'improves' its positioning in the world network by offshoring the production of its intermediates.
Lindsay Oldenski, 16 October 2012
The state of the US middle class has been a key issue this election season as middle-income workers have experienced relative wage losses in the last decade. Skill-biased technology change has previously been identified as a major cause of this polarisation of wages in the US. But this column shows that there is also an empirical link between offshoring by US firms and the polarisation of the US labour market.
Yasuyuki Todo, 15 July 2012
Offshoring continues to be a controversial issue in many developed countries. This column provides evidence from Japan and argues that policymakers should not worry too much about the loss of jobs; while unskilled jobs are offshored, they are replaced with skilled jobs, leading to a more productive use of the domestic labour force.
Rachel Griffith, Helen Miller, Laura Abramovsky, 15 March 2012
Multinational firms outsourcing or offshoring their operations to developing countries is a problem as old as globalisation. This column looks at the effect on high-skilled labour in the home country. It presents evidence that, on average, when firms start employing high-skilled workers offshore, they also increase the number of this type of worker employed at home.
Giordano Mion, Andrea Ariu, 25 February 2012
Services trade has increased dramatically in the last 20 years. This column examines data from Belgium and suggests that the change in IT use does not translate into higher services exports. It argues instead that offshoring is a key factor contributing to the rise of services trade.
Holger Görg, Ingo Geishecker, Christiane Krieger-Boden, 24 December 2011
The effects of offshoring on wages remain a hotly debated issue. This column explores the case of UK firms between 1992 and 2004, recognising that offshoring in one particular industry may also affect labour demand in other industries. It suggests that services and materials offshoring increase the wages of high-skilled workers and decreases the wages of low- and medium-skilled workers, thus contributing to a rising wage inequality.
Xiaole Wu, Fuqiang Zhang, 05 November 2011
As the global economic downturn grinds on, more companies are acknowledging that labour costs aren’t always the most important factor when deciding where to build their next factory. This column argues that, in times of recession, some companies find that bringing their business home can give them a competitive edge.
Alyson Ma, Ari Van Assche, 18 May 2011
Why do firms offshore manufacturing to China? This column uses data from China’s processing trade regime to argue that a hidden driver is the country’s geographic proximity to its East Asian neighbours.