PhD-Project: Offshoring, Employment and Wages

Ph.D. Project – Offshoring, Employment and Wages, Alessandro Bramucci, Ph.D. in Economics and Management at the University of Urbino “Carlo Bo” (Italy)

About

Over the last three decades, political, technological and social transformations favoured a strong reorganisation of working processes and business structures. The impact of offshoring, broadly intended as the relocation of business functions abroad or as the subcontract of production of additional inputs to non-affiliated suppliers, is ambiguous. While offshoring can complement domestic operations helping firms to increase productivity, output and labour, it can also substitute domestic activities in particular highly routinized tasks at the expense of less skilled workers.

The first part of this project is devoted to reviewing and discussing the literature dealing with impact of production and service offshoring in industrialized countries on domestic employment and wages. Results appear different when looking at the effect of manufacturing offshoring, service offshoring or when offshoring is investigated at the industry, at the firm or at the individual level. A model that relates employment and wages with offshoring is proposed and empirically tested with 2-digit industry-level data collected from various statistical sources (LFS, WIOD, CIS). The analysis is conducted on a sample of 37 industries from 2000 to 2011 for five of the major European economies (Germany, Spain, France, Italy and the United Kingdom).

The novelty of the approach proposed with this model resides in two aspects. First, employment is not only analysed as an aggregate variable but it is also divided into four occupational groups, namely managers, clerks, craft and manual workers. While there are many studies that relate offshoring with the relative labour demand of high-skilled and low-skilled workers, there are no empirical studies that proposed a more detailed differentiation of employment groups. Second, the offshoring indicators proposed here differentiate the technological level of offshoring based on the level of technology embodied by the industry from which intermediate inputs are sourced.

The second part of this work deals with the impact of codetermination (Mitbestimmmung) in Germany on the business decisions to relocate domestic operations abroad. Germany has stronger codified elements of workers’ representation, both at plant and managerial level, thus represents a reference point for the investigation of the impact of labour market institutions and industrial relations on offshoring. Using both scattered evidence and illustrative case studies personally conducted with representatives of three works councils from the region of Baden-Württemberg, the second part of this research will show that while codetermination may not impede offshoring it might actually influence its direction and intensity, contributing to moderate its negative effects on domestic activities, with particular attention to the protection of home employment.

Related Publications

  • Bramucci, A., Cirillo, B., Evangelista, R., Guarascio, D. (2017): Offshoring, Industry Heterogeneity and Employment, IPE Working Paper No. 88/2017.
  • Bramucci, A. (2016): Offshoring, Employment and Wages, IPE Working Paper No. 71/2016.
  • Azarhoushang B., Bramucci A., Herr H., Ruoff B. (2015): Value Chains, Under-Development and Union Strategy, International Journal of Labour Research, 7(1-2) pp. 153-175.
  • Bramucci A., Zanfei A. (2015): The Governance of Offshoring and its Effects at Home. The Role of Codetermination in the International Organization of German Firms, Journal of Industrial Business and Economics, 42(2), pp. 217–244. DOI: 10.1007/s40812-015-0010-9