Browsing by Subject "Offshoring"

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Offshore outsourcing : a global shift in the present IT industry
(2005) Erber, Georg; Sayed-Ahmed, Aida
The paper analyses the offshore outsourcing of IT services (OOIT), which have become increasingly important for the global IT industry. Through this rapid process of firm relocation, a new terminology has emerged, which forms the starting point for our paper. We compare wage cost differentials of IT workers in key offshore locations like India to those in the US and Europe, incorporating the hidden costs of offshoring ? including long-term risks and opportunities ? in order to determine the total cost of offshore outsourcing activities. The debate on the potential future negative employment impacts in the major OECD countries recently became a point of political contention in the US presidential election campaign, reflecting widespread fears in the US and elsewhere that outsourcing will lead to decreased income and job loss. In Europe, policy makers are searching for instruments to guide these developments so that major social disruptions do not lead to disproportionately negative welfare impacts in the short term. The future costs and benefits of outsourcing can currently be assessed only in broad terms due to the lack of adequate data and representative statistics. However, the theory of comparative advantages suggests that overall, offshoring and inshoring countries will gain from the new international division of labour in the long run.
Offshoring and labour market reforms : modelling the German experience
(2015) Hellier, Joël; Beißinger, Thomas; Chusseau, Nathalie
A usual interpretation of the high performance of the German economy since 2005 is that the Hartz labour market reforms have boosted German competitiveness, resulting in higher exports, higher production and lower unemployment. This explanation is at odds with the sequence of observed facts. We propose and model an alternative scenario in which offshoring explains the gains in competitiveness but increases unemployment and inequality, and the subsequent labour market reforms lower unemployment by lessening the reservation wage and expanding the non-tradable sector. The model replicates the developments of the German economy since 1995: 1) Germany offshores more intensively than other advanced countries; 2) The increase in competitiveness and in the exports/production ratio occurs before the implementation of the labour market reform, and this comes with both higher inequality and higher unemployment; 3) The implementation of the reform reduces unemployment, but also decreases the exports/production ratio and increases inequality. The model also predicts that the reduction in unemployment in Germany would have occurred without the Hartz reforms, but later and less intensively. We finally discuss the possible extension of this ‘strategy’ to other Eurozone countries, and alternative policies that activate similar mechanisms without increasing inequality.
Service offshoring and the demand for less-skilled labor : evidence from Germany
(2007) Schöller, Deborah
Besides material offshoring, economists have started to analyze the impact of service offshoring on domestic employment. Services are of particular interest since their significance has grown in terms of both quantity and quality. One decade ago, most services were considered non-tradable, but the emergence of new information and communication technologies has contributed to overcoming geographical distance. The move towards the liberalization of international service trade has further accelerated this process. The empirical part of this paper first calculates German service offshoring intensities on a sectoral basis using input-output data. This measurement represents the proportion of imported service inputs used in home production. Germany?s average service offshoring intensity more than doubled from 1991 to 2003. In a next step, the impact of service offshoring on the demand for heterogeneous labor in Germany is estimated at a sectoral level including 28 manufacturing sectors. The partial static equilibrium model is based on a variable unit cost function in the general translog form allowing for quasi-fixed input factors. Two different skill-levels are taken into account. The estimation results indicate that service offshoring reduced the relative demand for less-skilled labor in the German manufacturing sectors by on average -0.06 to -0.16% per year between 1991 and 2000.
Service offshoring: a challenge for employment? : evidence from Germany
(2006) Schöller, Deborah
Besides material offshoring, economists have started to analyze the impact of service offshoring on domestic employment. Services are of particular interest since their significance has grown not only in terms of quantity, but also of qualitative understanding. One decade ago, most services were considered non-tradable, but the appearance of new information and communication technologies has contributed to overcoming geographical distance. The introduction of the paper aims at giving an appropriate definition of service offshoring also taking into account the different motives behind offshoring. The theoretical part gives a brief literature overview of the predicted effects of offshoring on domestic employment. The empirical part first compares import data of computing and information as well as other business services and states that service offshoring is more relevant in Germany than in most other countries. Secondly, German service offshoring intensities are calculated on a sectoral basis using input-output data. This measurement represents the proportion of imported service inputs used in home production. Germany?s average service offshoring intensity more than doubled from 1991 to 2002. Besides this, indications for a possible negative correlation between German service offshoring and manufacturing employment are given. Thirdly, the impact of service offshoring on German domestic manufacturing employment is estimated at a sectoral level. The author refers to the labor demand specification of Hamermesh using sectoral wages, output and other input prices as exogenous variables. The estimation results indicate that service offshoring was negatively related to manufacturing employment in Germany between 1991 and 2000.