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The Internal and External Effects of Offshoring on Job Security

El-Sahli, Zouheir LU ; Gullstrand, Joakim LU and Olofsdotter, Karin LU (2017) In Working Papers
Abstract
In this paper, we investigate the effects of offshoring on workers' job security using matched employer-employee data from Sweden. For our observed period (1997-2011), while the share of firms engaged in offshoring fell during the period from around 25% to 22%, offshoring per worker within offshoring firms almost doubled. We make use of this variation to contribute to the literature on several fronts by examining both the internal (i.e., firms' own offshoring activities) and the external (i.e., neighboring firms’ offshoring activities) effects of offshoring on workers' employment spells. To deal with potential endogeneity, we use instruments based on world supply shocks for both the internal and external measures of offshoring. Our results... (More)
In this paper, we investigate the effects of offshoring on workers' job security using matched employer-employee data from Sweden. For our observed period (1997-2011), while the share of firms engaged in offshoring fell during the period from around 25% to 22%, offshoring per worker within offshoring firms almost doubled. We make use of this variation to contribute to the literature on several fronts by examining both the internal (i.e., firms' own offshoring activities) and the external (i.e., neighboring firms’ offshoring activities) effects of offshoring on workers' employment spells. To deal with potential endogeneity, we use instruments based on world supply shocks for both the internal and external measures of offshoring. Our results suggest that external offshoring has a greater impact on job security than internal offshoring. In addition, having a university degree, being young, and being new to the job all reduce the risk of a job exit due to increased external offshoring. This result is indicative of a Schumpeterian job restructuring effect of offshoring, where old jobs are replaced by newer ones. Finally, the increased risk of a job exit from external offshoring is limited to workers in small firms that do not offshore themselves, suggesting a higher vulnerability of these firms to local shocks.

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Please use this url to cite or link to this publication:
author
; and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
offshoring, heterogeneous firms, job security, globalization, F16, F66, J64
in
Working Papers
issue
2017:14
pages
32 pages
publisher
Department of Economics, Lund University
language
English
LU publication?
yes
id
8376c832-529d-4b43-a874-ca4d1586fb03
alternative location
http://swopec.hhs.se/lunewp/abs/lunewp2017_014.htm
date added to LUP
2017-11-13 16:13:53
date last changed
2025-04-04 14:25:06
@misc{8376c832-529d-4b43-a874-ca4d1586fb03,
  abstract     = {{In this paper, we investigate the effects of offshoring on workers' job security using matched employer-employee data from Sweden. For our observed period (1997-2011), while the share of firms engaged in offshoring fell during the period from around 25% to 22%, offshoring per worker within offshoring firms almost doubled. We make use of this variation to contribute to the literature on several fronts by examining both the internal (i.e., firms' own offshoring activities) and the external (i.e., neighboring firms’ offshoring activities) effects of offshoring on workers' employment spells. To deal with potential endogeneity, we use instruments based on world supply shocks for both the internal and external measures of offshoring. Our results suggest that external offshoring has a greater impact on job security than internal offshoring. In addition, having a university degree, being young, and being new to the job all reduce the risk of a job exit due to increased external offshoring. This result is indicative of a Schumpeterian job restructuring effect of offshoring, where old jobs are replaced by newer ones. Finally, the increased risk of a job exit from external offshoring is limited to workers in small firms that do not offshore themselves, suggesting a higher vulnerability of these firms to local shocks.<br/><br/>}},
  author       = {{El-Sahli, Zouheir and Gullstrand, Joakim and Olofsdotter, Karin}},
  keywords     = {{offshoring; heterogeneous firms; job security; globalization; F16; F66; J64}},
  language     = {{eng}},
  note         = {{Working Paper}},
  number       = {{2017:14}},
  publisher    = {{Department of Economics, Lund University}},
  series       = {{Working Papers}},
  title        = {{The Internal and External Effects of Offshoring on Job Security}},
  url          = {{http://swopec.hhs.se/lunewp/abs/lunewp2017_014.htm}},
  year         = {{2017}},
}