Offshoring, Extent of the Shadow Economy and Productivity Effects. Evidence from Italian Manufacturing Firms

SERIES Working Paper No. 21

47 Pages Posted: 1 Jun 2011 Last revised: 7 Jun 2011

See all articles by Vito Amendolagine

Vito Amendolagine

University of Bari - Faculty of Economics

Rosa Capolupo

University of Bari

Giovanni Ferri

LUMSA University

Abstract

We examine whether offshoring firms outperform purely domestic firms – in terms of efficiency, innovativeness and skill composition – in the peculiar context of Italy, the G7 country with the largest shadow-economy share. We posit that manufacturing firms – to counter emerging economies’ competition – could either offshore production or enter the shadow economy. Using propensity-score-matching and difference-in-difference techniques we find that offshoring: (i) impacts negatively TFP; (ii) is robustly caused by labour cost relocation; (iii) raises skill ratios; (iv) has a modest negative effect on employment growth; (v) is less likely for firms localised in high-shadow-economy provinces.

Keywords: trade integration, offshoring, empirics of global sourcing, shadow economy

JEL Classification: F13, F21, O19, E26

Suggested Citation

Amendolagine, Vito and Capolupo, Rosa and Ferri, Giovanni, Offshoring, Extent of the Shadow Economy and Productivity Effects. Evidence from Italian Manufacturing Firms. SERIES Working Paper No. 21. Available at SSRN: https://ssrn.com/abstract=1855273 or http://dx.doi.org/10.2139/ssrn.1855273

Vito Amendolagine (Contact Author)

University of Bari - Faculty of Economics ( email )

Piazza Cesare Battisti 1
Bari, Taranto 70121
Italy

Rosa Capolupo

University of Bari ( email )

Via Camillo Rosalba, 53
Faculty of Economics
70124 Bari
Italy
+39 080 504 9039 (Phone)
+39 080 5049149 (Fax)

Giovanni Ferri

LUMSA University ( email )

Via della Traspontina
Roma, Rome 00192
Italy

HOME PAGE: http://www.lumsa.it/giovanni-ferri

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