Job Market Paper
The effect of offshoring services on labour markets is ambiguous because any job losses may be offset by increases in productivity that in turn lead to new employment opportunities and higher wages. The present work combines unique detailed firm-level datasets of Great Britain for the period 1999-2012 to estimate the elasticities of employment and wages to services offshoring, defined as the imports of intermediates services from abroad. Being able to exactly locate firms and trade flows geographically, the analysis explores the heterogeneity of the effects between sectors and local areas, taking into account direct and indirect effects of services offshoring. Average analysis is complemented with distributional analysis and potential endogeneity is controlled using sectoral imports of services in other high income countries as instrument for services offshoring. I find that employment and average wages have positive elasticities to services offshoring both on firms' directly importing services, and indirectly, that is, on firms not involved in services offshoring but in the same sector and local area of the importing firms. Further, the most productive firms benefit the most from services offshoring, stretching the differences in employment and wages between firms and hence workers.
Covered by The Daily Telegraph (here)
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