Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata

34 Pages Posted: 4 Sep 2015

See all articles by Luigi Benfratello

Luigi Benfratello

University of Turin - Department of Economics and Financial Sciences G. Prato; CERIS-CNR

Tiziano Razzolini

University of Siena

Alessandro Sembenelli

University of Turin - Department of Economics and Financial Sciences G. Prato

Abstract

We provide evidence on the effect of ICT investment on the propensity to offshore for a sample of Italian manufacturing firms. To deal with the endogeneity of ICT investment we adopt an innovative identification strategy based on the availability of local broad band facilities. Contrary to previous literature focusing on services, we find a negative effect of ICT on offshoring. Furthermore, when splitting the sample according to the technological level, the effect is negative and significant only in the sub-sample of low-tech firms. This suggests that ICT capital substitutes for foreign workers in performing routine tasks in low-tech industries.

Keywords: ICT Investment, offshoring, maximum likelihood system estimation

JEL Classification: C34, C35, F20, L23

Suggested Citation

Benfratello, Luigi and Razzolini, Tiziano and Sembenelli, Alessandro, Does ICT Investment Spur or Hamper Offshoring? Empirical Evidence from Microdata. IZA Discussion Paper No. 9239, Available at SSRN: https://ssrn.com/abstract=2655280 or http://dx.doi.org/10.2139/ssrn.2655280

Luigi Benfratello (Contact Author)

University of Turin - Department of Economics and Financial Sciences G. Prato ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy
+39 011 6706072 (Phone)
+39 011 6706062 (Fax)

CERIS-CNR ( email )

Italy

Tiziano Razzolini

University of Siena ( email )

Via Banchi di Sotto, 55
Siena, 53100
Italy
+393493277244 (Phone)

Alessandro Sembenelli

University of Turin - Department of Economics and Financial Sciences G. Prato ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy
+39 011 670 6059 (Phone)
+39 011 670 6062 (Fax)

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