Service Offshoring and Firm Employment

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Dokumentart: Article
Date: 2017-10-12
Source: University of Tübingen Working Papers in Economics and Finance ; No. 103
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Economics
Other Keywords:
service offshoring
firm-level data
service trade
trade in tasks
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Major technological advances have recently spurred a new wave of offshoring in services, which used to be non-tradable. Should service workers in developed countries worry about their jobs? Trade theory has given a nuanced answer to this question, suggesting that efficiency gains from offshoring may counteract direct job losses, which leaves the predicted net effect ambiguous. This paper investigates the employment effects of service offshoring in a newly combined and exceptionally detailed panel dataset, covering almost the entire universe of German firms’ service imports over the years 2002-2013. It exploits firm-specific export supply shocks by partner countries and service types as an instrumental variable to find that service offshoring has increased firm employment. In line with the canonical trade in tasks model, the employment gains are greater in firms with higher initial levels of service offshoring.

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