Labour demand effects of international outsourcing: Evidence from plant-level data

We examine empirically the effect of international outsourcing on labour demand at the level of the individual plant. We do so by estimating a dynamic model of plant-level labour demand, using a Generalised Method of Moments estimator. We use plant-level data for the Irish Electronics sector, an industry that has expanded rapidly over the last decade and that has witnessed significant offshoring activity. Our results suggest that, in the short-run, there are significant reductions in plant-level labour demand, which we attribute to the use of international outsourcing. There appears to be stronger negative effects from outsourcing of materials than from services outsourcing.