Offshoring in Europe - Evidence of a Two-Way Street from Denmark

Abstract

Based on a large Danish survey of companies in tradable goods and services sectors, this working paper presents the results of offshoring and its impact on jobs, adding new perspectives to the globalization debate. Globalization entails a cross-border flow of jobs, but contrary to the mainstream media portrayal of globalization, it is not a one-way but a two-way street. In 2002-05 more jobs were created as a result of offshoring of activities into eastern Denmark from companies outside Denmark (i.e., inshored to Denmark) than were eliminated due to offshoring from companies in the Danish region. Overall, the employment effects of both offshoring and inshoring were found to be limited to less than 1 percent of all jobs either lost to offshoring or gained via inshoring. For Denmark, the worries in purely numerical terms regarding the employment effects of globalization seem overly alarmist. However, the trends revealed in the study do pose challenges for low-skilled workers - the group most negatively affected - and for highly skilled specialists, who face pressure to constantly upgrade their skills. Policy implications can be drawn in view of our results to ensure that labor markets are able to meet the demands of globalizing firms.

Keywords: Labor Market, Offshoring, Offshore Outsourcing, High- and Low-Skilled Workers, Skill Bias, Denmark, Flexicurity

JEL Classification: J23, J24, J38, L23