Service Imports, Workforce Composition, and Firm Performance: Evidence from Finnish Microdata

Abstract

This paper uses unique Finnish firm-level micro data on service imports, work-force composition, and firm characteristics to examine changes in employment composition and performance of Finnish service importers during a period of a significant increase in services imports (2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012). We use world service export supply shocks, which we allocate to firms based on their highly specialized service input structure, as an instrument to identify the impact of service offshoring. We find that firms that increase imports of service inputs reduce employment of low-skill service workers, increase employment of (high-skilled) managers and improve their performance in terms of sales (turnover), assets, service exports, and firm survival. The employment composition and performance responses to service imports differ across firms in the manufacturing sector and those in the service sector. JEL-Codes: F100, F140, L800.

The Direct and Indirect Effect of Services Offshoring on Local Labour Market Outcomes

“…More recently, Eppinger (2019) finds that firms importing services directly in Germany increase employment by 7% to a 10% increase in services offshoring. The same order of magnitude of the elasticities is observed in Ariu et al (2019b) which exploit the heterogeneities of the effects of services offshoring across workers using as case of study Finland.…”

“…Positive effects of services offshoring might be driven by certain categories of workers, as in Ariu et al (2019b) and Criscuolo and Garicano (2010) 7 , as well, services offshoring might have spillover effect on those workers employed in non-offshoring firms. The empirical analysis hence proceeds estimating the effects of services offshoring on the labour markets by workers' characteristics.…”

“…Differently from the rest of the literature on services offshoring, I look at the economic dynamics at local labour markets level. The unit of analysis represents a novelty as earlier studies typically consider either larger administrative or geographical units (Amiti and Wei, 2005a,b;Crinò, 2008;Gheishecker and Görg, 2011;Amiti and Wei, 2009b,a), or individual firms (Ariu et al, 2019b;Girma and Görg, 2004;Hijzen et al, 2011;Eppinger, 2019;Liu and Trefler, 2019). Compared to aggregate and industrylevel studies, the detailed firm-level data I use make it possible to obtain more accurate measures of services offshoring.…”

“…Hence I am able to discern the different channels through which offshoring affects firms. In the temporal dimension, the analysis covers the period from 2000 to 2015, which, to the best of my knowledge, is the longest and (except for Ariu et al, 2019b;Eppinger, 2019) most recent sample considered in the literature.…”

Growth Behaviour of India’s Export of Services, 1975–2018

“…6 Despite weighing down the current-account position in the initial stages, the productivity raises and opportunities for joint international ventures bought by the entry of foreign services offered scope for subsequent higher exports of the country (Roy, 2020;Shome, 2012). Also, services import content in exportable production had been found to upgrade skills, survival and competitiveness of services-exporting firms (Ariu et al, 2019). While both these claims require further examination, it is undeniable that soon enough growth of the country's real service exports springs past that of her imports to generate real trade surpluses from 2003.…”