Paper #1490

Title:

Offshoring and skill-upgrading in French manufacturing: A Heckscher-Ohlin-Melitz view

Authors:

Juan Carluccio, Alejandro Cuñat, Harald Fadinger and Christian Fons-Rosen

Date:

September 2015

Abstract:

We present a factor-proportions trade model in which heterogeneous firms can offshore intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high- productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant countries than low-productivity firms. Differently from the traditional versions of factor- proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading to endogenous variation in skill intensity across firms that is positively correlated with firm productivity. Using French firm-level data for the years 1996 to 2007, we provide empirical support for the factor proportions channel through which offshoring to labor-abundant countries affects the firm-level skill intensities of French manufacturers.

Keywords:

offshoring, heterogeneous firms, firm-level factor intensities, Heckscher-Ohlin

JEL codes:

F11, F12, F14

Area of Research:

Business Economics and Industrial Organization / Labour, Public, Development and Health Economics

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