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Offshoring, Plant Survival and Employment Growth
Author(s) -
Bandick Roger
Publication year - 2016
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12316
Subject(s) - offshoring , endogeneity , matching (statistics) , economics , margin (machine learning) , wage , labour economics , danish , low wage , instrumental variable , unit (ring theory) , propensity score matching , demographic economics , business , econometrics , outsourcing , statistics , linguistics , philosophy , mathematics , mathematics education , marketing , machine learning , computer science
This paper empirically investigates the effects of offshoring on plant survival and employment growth using data on the Danish manufacturing plants during the period 1995–2006. To control for the potential endogeneity of the offshoring decision, the paper uses instrumental variables and propensity score‐matching approaches. The data allow me to control for the heterogeneity between the units by using firm‐level offshoring activities in different regions and performing the empirical analysis on plantlevel aggregation, which is shown to be of crucial importance. Using firm as a unit of observation, the effect of offshoring is, if any, very small. However, using plant as a unit of observation, there are strong indications that offshoring plays a much larger role for the extensive and intensive margin of adjustments. The results reveal that plants survival prospect is higher if the main offshoring is located in high‐wage countries; lower if it is located in low‐wage countries; and not affected if it is located in medium‐wage countries. Finally, the results also reveal that depending on where the main offshoring is located, the growth rate of low‐skilled employment is 2 to 8 per cent lower in plants of offshoring firms.