Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1074: Offshoring, Total Factor Productivity and Skill-Biased Technological Change

Zhanar Akhmetova and Shon Ferguson ()
Additional contact information
Zhanar Akhmetova: Department of Economics, Postal: UNSW Business School, University of New South Wales Sydney, NSW 2052, Australia
Shon Ferguson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: The paper answers two questions simultaneously. What is the effect of offshoring on firms' total factor productivity? What is the effect of offshoring on skill-biased technological change? We estimate a model of firm production that allows for the effect of offshoring on both total factor productivity and relative skilled labor productivity, and for spillovers between the two. The model is fitted to Swedish firm-level data between 2001–2011. We find positive effects of offshoring intensity on total factor productivity, particularly of small domestic firms and large foreign-owned firms, and on skill-biased technological change in production of firms with low offshoring intensity. Initiating offshoring results in skill-biased technological change in non-production activities of large domestic firms. We show that evaluating the impact of offshoring in a unified framework has implications for the estimation results.

Keywords: Offshoring; Total factor productivity; Skill-biased technological change; Relative skilled labor demand

JEL-codes: D24; F14; F16

49 pages, June 18, 2015

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