Offshoring and job stability: Evidence from Italian manufacturing

• We study the relationship between offshoring and individual job stability in Italy.
• International fragmentation of production negatively affects job stability.
• Material offshoring to low income countries drives the most detrimental effects.
• Imports from low income countries drive blue collars out of manufacturing.

We study the relationship between offshoring and job stability in Italy in the period 1995–2001 by using an administrative dataset on manufacturing workers. We find that the international fragmentation of production negatively affects job stability. Service offshoring and material purchases from developed countries foster job-to-job transitions within manufacturing of all workers and white collars, respectively. However, the most detrimental effects for job stability come from material offshoring to low income countries which drives blue collar workers out of manufacturing. Therefore, policy interventions should especially focus on this latter category of workers more exposed to fragmentation processes and foreign competition