Services Offshoring and its Impact on the Labor Market (eBook)

Acknowledgements 5
Preface 7
Contents 9
Abbreviations 12
Variables 15
List of Figures 18
Chapter 1: Introduction 23
1.1 Motivation 23
1.1.1 Productivity 27
1.1.2 Employment Level 28
1.1.3 Employment Structure 32
1.2 Outline and Methodology 35
References 39
Chapter 2: Framework of Services Offshoring 42
2.1 Classification of Services Offshoring 42
2.1.1 Definition of Services Offshoring 43
2.1.1.1 Definitions of OutsourcingOutsourcing 43
2.1.1.2 Definitions of OffshoringOffshoring:definitions 45
2.1.1.3 Working Definition of Services OffshoringServices offshoring:definition 47
2.1.2 Services and their Tradability 50
2.1.2.1 Services and the Uno-Actu-Principle 50
2.1.2.2 Classification of Services TradeServices:trade 54
Classification of Service ProvisionService:provision according to the GeographicalLocation of Agents 54
Classification of Services Trade According to the Modes of ServiceSupplyService:supply, modes of in the GATS 55
2.1.2.3 Classification of Service ActivitiesService:activities 57
Several Approaches of Service ClassificationsService:classification 58
The Definition of Business ActivitiesBusiness activities 59
Other Commercial ServicesServices:other commercial 60
Other Business ServicesServices:other business 61
Technological ServicesServices:technological 62
Information Technology and Business Process Outsourcing Services 63
2.1.3 Offshoring - A Make-or-BuyMake-or-Buy Decision 64
2.1.3.1 Efficiency-Based MotivesEfficiency-Based Motives for Outsourcing 65
2.1.3.2 Resource-Based Motives for Outsourcing 68
The Basics of Resource-Based TheoriesResource-Based Theories 68
The Decision for Outsourcing 70
2.1.3.3 Transaction Cost-Based Motives for In-House Production 71
The Basics of Transaction Cost-Based TheoriesTransaction Cost-Based Theories 71
Transaction Costs with Market Purchases of Services 72
The Decision for In-House Production 73
2.2 Drivers of Services Offshoring 76
2.2.1 Global Developments 77
2.2.1.1 Developments in Information and Communication Technologies 77
The Age of Information and Telecommunications 77
Information and Communication Technologies in Developing CountriesInformation and communication technologies 79
2.2.1.2 Multilateral Liberalization of Trade in ServicesLiberalization: of trade in services, multilateral 81
2.2.1.3 Regional Liberalization of Trade in ServicesLiberalization: of trade in services, regional 84
2.2.2 Services Offshoring MotivesServices offshoring:motives of Firms 88
2.2.2.1 Market-Oriented MotivesMotives:market-oriented 89
2.2.2.2 Cost-Oriented MotivesMotives:cost-oriented 91
2.2.2.3 Procurement-Oriented MotivesMotives:procurement-oriented 93
Procurement of Agglomeration AdvantagesAgglomeration advantages 94
Procurement of Human CapitalHuman capital 95
2.2.3 Developments in the Destination Countries 96
2.2.3.1 Availability of Human CapitalHuman capital:in less-developed countries in Less-Developed Countries 96
2.2.3.2 Presence of Multinational Companies 100
2.2.3.3 Liberalization of Service SectorsLiberalization:of service sectors 101
References 104
Chapter 3: The Structure of Services Offshoring 110
3.1 German Services Offshoring in an International Comparison 110
3.1.1 Services Offshoring in a Worldwide Comparison 110
3.1.1.1 The Largest Offshoring CountriesServices offshoring:countries, by services category by Services Category 111
3.1.1.2 The Largest Surplus and Deficit CountriesBalance:trade, by services category by Services Category 111
3.1.1.3 The Largest Overall Services OffshoringServices offshoring:countries, largest overall and OnshoringServices onshoring: 116
3.1.2 Development of Services OffshoringServices offshoring:in selected OECD countries in Selected OECD Countries 118
3.1.2.1 Offshoring Development by Services Category 119
3.1.2.2 Changes in the Trade BalanceBalance:trade, in selected OECD countries by services category by Services Category 121
3.1.2.3 Overall Development of Services OffshoringServices offshoring:development in selected OECD countries and OnshoringServ 121
3.1.3 Calculation of Services Offshoring Intensities 122
3.1.3.1 Input-Output TablesInput-output:tables 122
3.1.3.2 Two Different Measures of Services Offshoring IntensityServices offshoring intensity:measures 126
3.1.3.3 Results for Germany 128
3.1.3.4 Comparison with the UK and the US 129
3.1.3.5 Offshoring Intensities in OECD Countries 130
3.2 Sectoral Structure of Services Offshoring 133
3.2.1 Sectoral Structure of Global Services OffshoringStructure:sectoral, of global services offshoring 133
3.2.1.1 The Structure of the Offshoring SectorsStructure:of the offshoring sectors 133
3.2.1.2 The Structure of Offshored ServicesStructure:of offshored services 135
3.2.2 Sectoral StructureStructure:sectoral, of German services offshoring of German Services Offshoring 136
3.2.2.1 The Structure of the Offshoring SectorsStructure:of the offshoring sectors 137
3.2.2.2 The Structure of Offshored ServicesStructure:of offshored services 140
3.3 Regional Structure of Services Offshoring 144
3.3.1 Destinations of Global Services OffshoringServices offshoring:global destinations 144
3.3.1.1 Offshore Destinations for Tradable Services 144
3.3.1.2 The Largest Onshoring CountriesServices onshoring:largest countries 145
3.3.1.3 Offshore Destinations for Research and Development ServicesOffshore destinations:research and development services 149
3.3.1.4 Offshore DestinationsOffshore destinations:IT and BPO services for IT and BPO Services 149
3.3.2 Destinations of German Services OffshoringServices offshoring:German destinations 155
References 160
Chapter 4: Labor Market Effects in (Neo)Classical Models of Offshoring 162
4.1 Offshoring of Final Goods 162
4.1.1 The Ricardian ModelRicardian Model 164
4.1.1.1 Offshoring in a Two-Goods Model with Autarky 164
Equilibrium in Autarky 164
Equilibrium with International Trade 166
4.1.1.2 Technological ProgressTechnological progress in the Two-Goods Model 168
Technological Progress in the Foreign Export Sector 168
Technological Progress in the Foreign Import Sector 168
4.1.2 The Heckscher-Ohlin ModelHeckscher-Ohlin model 170
4.1.2.1 The Basic Model 170
4.1.2.2 Free Trade EquilibriumEquilibrium:free trade and Four Theorems 172
4.1.3 The Specific-Factors ModelSpecific-Factors model 173
4.1.3.1 Offshoring in a Two-Goods Model 174
4.1.3.2 The Welfare EffectsWelfare effects of Offshoring 175
4.2 Offshoring of Intermediate Goods 176
4.2.1 The Basic Model 178
4.2.1.1 Modeling Trade in TasksTrade:in tasks 178
4.2.1.2 The Effects of Falling Offshoring-Costs 181
4.2.2 Different Scenarios 182
4.2.2.1 Offshoring in a Small EconomyOffshoring:in a small economy 182
4.2.2.2 Offshoring in a Large EconomyOffshoring:in a large economy 184
4.2.2.3 Labor-Supply Effect 185
4.2.2.4 Offshoring of Skill-Intensive TasksOffshoring:of skill-intensive tasks 185
References 187
Chapter 5: Labor Market Effects of Services Offshoring: Empirical Evidence 189
Introduction 189
5.1 Services Offshoring and Its Impact on Productivity in Germany 189
5.1.1 Basics of the Empirical Analysis 192
5.1.1.1 Theoretical and Empirical Model 192
5.1.1.2 Hypothesis 194
5.1.1.3 Data 195
5.1.2 Estimations with Unrevised Input-Output Data: 1991-2000 197
5.1.2.1 Preliminary Analysis 197
5.1.2.2 Estimation Results: Total Factor ProductivityProductivity:total factor 197
5.1.2.3 Estimation Results: Labor ProductivityProductivity:labor 203
5.1.3 Estimations with Revised Input-Output Data: 1995-2004 208
5.1.3.1 Preliminary Analysis 208
5.1.3.2 Estimation Results: Total Factor ProductivityProductivity:total factor 212
5.1.3.3 Estimation Results: Labor ProductivityProductivity:labor 218
5.2 Services Offshoring and Its Impact on Labor Demand in Germany 223
5.2.1 Basics of the Empirical Analysis 223
5.2.1.1 Theoretical and Empirical Model 223
Theoretical Model 223
Empirical Model 224
5.2.1.2 Hypothesis 226
5.2.1.3 Data 227
5.2.2 Estimations with Unrevised Input-Output Data: 1991-2000 227
5.2.2.1 Preliminary Analysis 227
5.2.2.2 Estimation Results 228
5.2.3 Estimations with Revised Input-Output Data: 1995-2004 238
5.2.3.1 Preliminary Analysis 238
5.2.3.2 Estimation Results 239
5.3 Services Offshoring and Its Impact on the Relative Demand for Less-Skilled LaborLess-skilled labor in Germany 246
5.3.1 Basics of the Empirical Analysis 246
5.3.1.1 Theoretical and Empirical Model 246
Theoretical Model 246
Empirical Model 248
5.3.1.2 Hypothesis 250
5.3.1.3 Data 251
5.3.2 Estimations with Unrevised Input-Output Data: 1991-2000 252
5.3.2.1 Preliminary Analysis 252
5.3.2.2 Estimation Results 253
5.3.3 Estimations with Revised Input-Output Data: 1995-2004 260
5.3.3.1 Preliminary Analysis 260
5.3.3.2 Estimation Results 261
References 266
Chapter 6: Conclusion 268
6.1 Summary of Results 268
6.2 Implications and Economic Policy Recommendations 274
6.2.1 Labor Market Insecurity in Selected OECD Countries 275
6.2.1.1 Perceptions of Labor Market Insecurity 275
6.2.1.2 Unemployment, Inequality, and the Burden of Risk 276
Unemployment and Inequality 276
The Burden of Risk 279
6.2.2 Security and Flexibility: The ``Flexicurity´´ Model 280
6.2.2.1 Different Country Models 280
6.2.2.2 Promoting ``Flexicurity´´ in Germany 282
6.2.3 Effective Education PolicyEducation: policy 288
6.2.3.1 Shortage of Workers with Vocational EducationEducation:vocational 289
6.2.3.2 Shortage of Workers with Tertiary EducationEducation:tertiary 291
References 294
Appendices 298
A: The Networked Readiness Index 2006-2007 Rankings 298
B: Absolute Onshoring Development per Services Category (M US$) 301
C: Relative Onshoring Development per Services Category(% of Other Services) 302
D: Material and Service Inputs 302
E: List of Country Abbreviations 303
F: Sectoral Services Offshoring Intensities OSSi(a) 1991 versus 2000 305
G: Sectoral Materials Offshoring Intensities OSMi(a) 1991 versus 2000 306
H: Sectoral Materials Offshoring Intensities OSMi(a) 1995 versus 2004 307
I: Global Services Attractiveness Index 2007 308
J: Exports and Imports of Goods and Services 309
Index 310