Offshoring and skill-upgrading in French manufacturing

Using French manufacturing firm-level data for the years 1996–2007, we uncover a novel set of stylized facts about offshoring behavior: (i) Low-productivity firms (“non-importers”) obtain most of their inputs domestically. (ii) Medium-productivity firms offshore skill-intensive inputs to skill-abund...

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Bibliographic Details
Published in:Journal of international economics 2019-05, Vol.118, p.138-159
Main Authors: Carluccio, Juan, Cuñat, Alejandro, Fadinger, Harald, Fons-Rosen, Christian
Format: Article
Language:English
Subjects:
Firm-level factor intensities
Heterogeneous firms
Offshoring
Skill upgrading Heckscher-Ohlin
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Summary:Using French manufacturing firm-level data for the years 1996–2007, we uncover a novel set of stylized facts about offshoring behavior: (i) Low-productivity firms (“non-importers”) obtain most of their inputs domestically. (ii) Medium-productivity firms offshore skill-intensive inputs to skill-abundant countries and are more labor intensive in their domestic production than non-importers. (iii) Higher-productivity firms additionally offshore labor-intensive inputs to labor-abundant countries and are more skill intensive than non-importers. We develop a model in which heterogeneous firms, subject to fixed costs, can offshore intermediate inputs of different skill intensities to countries with different skill abundance. This leads to endogenous within-industry variation in domestic skill intensities. We provide econometric evidence supporting the factor-proportions channel through which reductions in offshoring costs to labor-abundant countries have significantly increased firm-level skill intensities of French manufacturers.
ISSN:0022-1996
1873-0353
DOI:10.1016/j.jinteco.2019.01.001