Does offshoring affect industry employment? Evidence from a wide European panel of countries

This paper contributes to the literature on the possible impact of international outsourcing on domestic labour markets. We focus on offshoring-employment rela- tionship. The analysis is performed for a wide European panel, composed of 27 EU countries and 13 manufacturing sectors, observed in the period 1995-2009. Thanks to the use of input-output tables from the WIOD project, we measure the intensity of offshoring in the sectors, as well as its decomposition into the domestic and foreign components. Theoretical background for our analysis is rooted in recent trade-in-tasks models of international trade. Our empirical results, based on the estimation of panel data model, suggest that indeed domestic employment in EU manufacturing can be pushed down by increased offshoring. More specifically, low skill workers are the ones to be affected the most because of shrinking labour demand at home.