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Downstream offshoring and firm‐level employment
Author(s) -
Merlevede Bruno,
Michel Bernhard
Publication year - 2020
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12425
Subject(s) - offshoring , downstream (manufacturing) , upstream (networking) , shock (circulatory) , upstream and downstream (dna) , demand shock , industrial organization , business , economics , sample (material) , manufacturing , manufacturing sector , outsourcing , labour economics , monetary economics , operations management , marketing , medicine , computer network , chemistry , chromatography , computer science
When engaging in offshoring, firms import not only intermediates they used to produce in‐house but also intermediates they previously sourced from non‐affiliated domestic suppliers. This leads to a negative demand shock for the latter. We label this demand shock “downstream offshoring” and develop a novel measure capturing its extent for a firm in a given upstream industry. According to our instrumental variables estimations for a rich sample of Belgian manufacturing firms for the period of 1997 to 2007, downstream offshoring has a robust negative effect on employment.