Offshoring and Firm Overlap

64 Pages Posted: 27 Mar 2017

See all articles by Stella Capuano

Stella Capuano

Institute for Employment Research (IAB), Nuremberg, Germany

Hartmut Egger

University of Bayreuth - Department of Economics

Michael Koch

University of Bayreuth - Faculty of Law, Business and Economics

Hans‐Jörg Schmerer

Fern Universität in Hagen

Date Written: March 01, 2017

Abstract

We set up a model of offshoring with heterogeneous producers that captures two empirical regularities of German offshoring firms. There is selection of larger, more productive firms into offshoring. However, the selection is not sharp, and offshoring and non-offshoring firms coexist over a wide range of the revenue distribution. An overlap of offshoring and non-offshoring firms emerges in our model because, in contrast to textbook models of trade with heterogeneous producers, we allow firms to differ in two technology parameters thereby decoupling the offshoring status of a firm from its revenues. In an empirical analysis, we employ firm-level data from Germany to estimate key parameters of the model and show that ignoring the overlap lowers the estimated gains from offshoring by more than 50 percent and, at the same time, exaggerates substantially the importance of the extensive margin for explaining the evolution of German offshoring over the last 25 years.

Keywords: offshoring, heterogeneous firms, firm overlap, quantitative trade model, extensive and intensive margins of offshoring

JEL Classification: F120, F140, L110

Suggested Citation

Capuano, Stella and Egger, Hartmut and Koch, Michael and Schmerer, Hans‐Jörg, Offshoring and Firm Overlap (March 01, 2017). CESifo Working Paper Series No. 6361. Available at SSRN: https://ssrn.com/abstract=2941359

Stella Capuano

Institute for Employment Research (IAB), Nuremberg, Germany ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Hartmut Egger (Contact Author)

University of Bayreuth - Department of Economics ( email )

Universitatsstr 30
Bayreuth, D-95447
Germany

Michael Koch

University of Bayreuth - Faculty of Law, Business and Economics

Universitätsstraße 30
Bayreuth, 95447
Germany

Hans‐Jörg Schmerer

Fern Universität in Hagen

Universitätsstrasse 41
Feithstrathe 140
Hagen, 58084
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
32
Abstract Views
685
PlumX Metrics