Offshoring and skill-upgrading in French manufacturing

• Main Authors: Carluccio, J. (Author), Cuñat, A. (Author), Fadinger, H. (Author), Fons-Rosen, C. (Author)
• Format: Article
• Language: English
• Published: Elsevier B.V. 2019
• Subjects: econometrics; Firm-level factor intensities; France; Heterogeneous firms; industrial practice; manufacturing; offshoring; Offshoring; productivity; Skill upgrading Heckscher-Ohlin; skilled labor
• Online Access: View Fulltext in Publisher

 Using French manufacturing firm-level data for the years 1996–2007, we uncover a novel set of stylized facts about offshoring behavior: (i) Low-productivity firms (“non-importers”) obtain most of their inputs domestically. (ii) Medium-productivity firms offshore skill-intensive inputs to skill-abundant countries and are more labor intensive in their domestic production than non-importers. (iii) Higher-productivity firms additionally offshore labor-intensive inputs to labor-abundant countries and are more skill intensive than non-importers. We develop a model in which heterogeneous firms, subject to fixed costs, can offshore intermediate inputs of different skill intensities to countries with different skill abundance. This leads to endogenous within-industry variation in domestic skill intensities. We provide econometric evidence supporting the factor-proportions channel through which reductions in offshoring costs to labor-abundant countries have significantly increased firm-level skill intensities of French manufacturers. © 2019 Elsevier B.V.