Offshoring, Firm Performance and Establishment-Level Employment: Identifying Productivity and Downsizing Effects

41 Pages Posted: 7 Oct 2009

See all articles by Christoph Moser

Christoph Moser

Johannes Gutenberg University Mainz - Faculty of Law and Economics

Dieter Michael Urban

RWTH Aachen University - School of Economics and Business Administration

Beatrice Weder di Mauro

Graduate Institute Geneva, IHEID

Date Written: September 2009

Abstract

This paper examines the channels through which offshoring affects employment in a representative sample of German establishments, using a difference-in-differences matching approach. Offshoring establishments are identified by an increase in the share of foreign to total inputs. We find that an average offshoring establishment has higher employment, higher productivity, and higher domestic and foreign market share than if it did not engage in offshoring. Furthermore, its production depth remains unchanged indicating that offshoring predominantly operates through a substitution of domestic for foreign suppliers, rather than through a reduction of home production. This result enables us to isolate a positive productivity effect from offshoring on employment. However, employment in an establishment decreases - relative to its counterfactual - when it simultaneously engages in offshoring and restructuring of the home plant. Therefore, we are also able to isolate a negative downsizing effect of offshoring on employment.

Keywords: difference-in-differences matching estimator, export performance, offshoring, stable unit treatment value assumption

JEL Classification: C21, F16, F23

Suggested Citation

Moser, Christoph and Urban, Dieter Michael and Weder di Mauro, Beatrice, Offshoring, Firm Performance and Establishment-Level Employment: Identifying Productivity and Downsizing Effects (September 2009). CEPR Discussion Paper No. DP7455, Available at SSRN: https://ssrn.com/abstract=1484488

Christoph Moser (Contact Author)

Johannes Gutenberg University Mainz - Faculty of Law and Economics ( email )

Chair of Corporate Finance
D-55099 Mainz, 55128
Germany

Dieter Michael Urban

RWTH Aachen University - School of Economics and Business Administration ( email )

Aachen
Germany

Beatrice Weder di Mauro

Graduate Institute Geneva, IHEID ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland
1211 (Fax)

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