Can we really trust offshoring indices?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Can we really trust offshoring indices? Terms of use: Documents in DAVIDE CASTELLANI LUCA DE BENEDICTIS DANIEL HORGOS Zusammenfassung/ AbstractThis paper argues that indices of (business) service and material offshoring built on sectoral input-output data may actually measure something different than what we think they should.Applying shift-share analysis we decompose the variation over time of a commonly used class of such indices into two components: one related to the intensity in the import of intermediate inputs, and the other associated with the use of such inputs in the production of manufacturing goods. Using data from input-output tables of 21 European countries from 1995 to 2006, we show that in the case of service offshoring, in most countries a larger part of the variance is driven by the raising share of (domestically produced) services used in manufacturing production, while the share of imported services contributes to a much smaller extent. When we focus on the subset of business services, evidence shows a relatively larger tendency towards relying on imported rather domestically produced inputs. Instead, in the case of material offshoring there is evidence that foreign suppliers have substituted domestic ones. However, this pattern is strongest in countries, such as Estonia, Hungary and Slovenia, where incoming multinationals, rather than domestic firms offshoring production may be the driving force.JEL-Klassifikation / JEL-Classification: F14, F10

The effects of offshoring to low-wage countries on domestic wages: a worldwide industrial analysis

“…Finally, we adopt a decomposition of conventional overall offshoring measures (calculated-in the spirit of Feenstra and Hanson 1999-as the sum of imported inputs related to the total value of production of the industry in which they are used) into purely international and domestic components. As Castellani et al (2013) argue, typical measures of offshoring tend to overestimate the role of international components (imported inputs) and neglect the role played by structural changes and flows of intermediates within the domestic economy. Consequently, the adopted decomposition allows us to distinguish between the wage effects of the international component of outsourcing and the effects of domestic outsourcing practices.…”

“…This broad measure allows us to capture the inter-industry effects of offshoring on the performance of industries incorporating cross-industry spillovers, which need not be the same as intra-industry effects. 17 Furthermore, following Castellani et al (2013), we decompose the offshoring index (1) into its international and domestic components:…”

“…The first expression is the ratio of imported inputs to domestic ones (IntOUT-international outsourcing) while the second reflects the intensity of domestic outsourcing (DomOUT). 18 As Castellani et al (2013) argue, offshoring indices calculated as the share of imported inputs over production (Eq. 1) ignore the role played by structural changes in the domestic economy, reflected in the Dom-OUT component, and tend to overestimate the role played by sourcing to foreign destinations.…”

International Competition Intensified: Job Satisfaction Sacrificed?

“…Applying the calculation schemes presented in Horgos (2009) and Castellani et al (2013), we consider an aggregate measure of offshoring (that is all inputs used in production), material offshoring (material inputs used in production), and service offshoring (service inputs used in production). As will be seen shortly, interesting results emerge i.a.…”

“…In order to dissect the two components of the offshoring index, we follow i.a. Horgos (2009) and Castellani et al (2013), who decompose the index by looking at two ratios, namely the ratio of imported to domestically sourced intermediates and the ratio of domestically sourced intermediates to gross output.…”