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Assessing the impact of domestic outsourcing and offshoring on productivity at the firm level

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The purpose of this article is to investigate the effects of domestic and foreign sourcing on firm-level productivity. We develop a simple framework that permits the introduction of both domestic outsourcing and offshoring in a conventional production function. We find that the decision to outsource has a positive impact on the level of productivity as it permits the relocation of parts of the production process to external suppliers. Furthermore, there is a positive impact on output resulting from domestic outsourcing and offshoring like any other input.

Keywords: D24; F10; M20; domestic outsourcing; offshoring; production function; total factor productivity

Document Type: Research Article


Affiliations: 1: Departamento de Economía Aplicada II, Universidad Complutense de Madrid, Madrid, Spain 2: Departamento de Fundamentos del Análisis Económico I, Universidad Complutense de Madrid, Madrid, Spain 3: Departamento de Análisis Económico II, UNED, Madrid, Spain

Publication date: May 24, 2014

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