New Outsourcing, Demand Uncertainty and Labor Usage

30 Pages Posted: 4 Sep 2014 Last revised: 25 Aug 2015

See all articles by Sasan Bakhtiari

Sasan Bakhtiari

Australian Department of Industry; Crawford School, ANU

Robert V. Breunig

Australian National University (ANU) - Crawford School of Public Policy

Date Written: August 25, 2015

Abstract

It has been theorized that businesses are more likely to outsource when demand uncertainty is large in order to gain flexibility in production. We provide the first firm-level test of this hypothesis, making use of unique longitudinal data on Australian manufacturing. We find that new outsourcing is related to lower net job growth and an increase in work intensity within the firm. Overall, we find no relationship between unexpectedly high demand and new outsourcing. The inly exception is for large firms who expect sales to decrease. New outsourcing appears to be related to the firm's overall approach to labor utilization rather than a response to demand fluctuations.

Keywords: Outsourcing, Demand Uncertainty, Labor Adjustment, Firm-Level Data

JEL Classification: D22, L21, L24, L6

Suggested Citation

Bakhtiari, Sasan and Breunig, Robert V., New Outsourcing, Demand Uncertainty and Labor Usage (August 25, 2015). Available at SSRN: https://ssrn.com/abstract=2491489 or http://dx.doi.org/10.2139/ssrn.2491489

Sasan Bakhtiari (Contact Author)

Australian Department of Industry ( email )

341 George Street
Sydney, NSW 2000
Australia

HOME PAGE: http://sites.google.com/site/sasanbakhtiari

Crawford School, ANU ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia

HOME PAGE: http://sites.google.com/site/sasanbakhtiari

Robert V. Breunig

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia
61261252148 (Phone)

HOME PAGE: http://https://crawford.anu.edu.au/crawford_people/content/staff/rbreunig.php

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