Potential Impacts of International Sourcing on Different Occupation

Abstract

This paper uses trade and employment data to examine the relationship between the share of employment potentially affected by offshoring and economic and structural factors, including trade in business services and foreign direct investment, using simple descriptive regressions for a panel of OECD economies between 1996 and 2003. It extends the earlier model [see DSTI/ICCP/IE(2005)8/FINAL] to test whether there are differences in the factors driving the shares of potentially offshorable "non-clerical" occupations, or professionals such as managers, consultants and engineers, and clerical occupations in total employment. Separate indicators for manufacturing and services foreign direct investment are included.The results show a positive statistical association between the share of both "non-clerical" and clerical occupations potentially affected by offshoring and exports of business services, and a negative association with imports of business services. However, the results also show important differences between different types of occupations as they behave differently over time (the share of professionals, or "non-clerical" generally growing over time and the share of clerical declining), and are affected differently by the economic and structural variables included in the model. In particular, net outward manufacturing FDI, ICT investment, and the relative size of the services sector all have a positive association with the share of employment in potentially offshorable professionals ("non-clerical" occupations), but are negative with clerical occupations. On the other hand, union density has a positive statistical association with clerical occupations but negative with professionals, or "non-clerical" occupations. These results have important implications for policy, as they clearly suggest that different factors are driving the performance of different occupational groups. 2.