International Outsourcing and Productivity in Italian Manufacturing Sectors

Abstract

This paper estimates the effect of international outsourcing of materials and services on productivity in Italian manufacturing sectors during the period 1985-1997. Three different measures of outsourcing are used. Firstly, a "narrow" measure of outsourcing is calculated as the intensity of intermediate inputs that each sector imports from the same sector abroad. Secondly, a "broad" measure of outsourcing of materials is calculated as the intensity of materials imported from non-energy manufacturing sectors abroad. Finally, outsourcing of services is measured as the total imported business and financial services. Outsourcing is modelled as to affect TFP and the results suggest a general positive effect of outsourcing of materials. The effect of outsourcing of services seems to be ambiguous: it is positive for the traditional sectors and negative for the advanced sectors.

Keywords: international outsourcing, productivity, Italy

JEL Classification: F15, L60