Offshoring, Inshoring and Labor Market Volatility

Using sectoral data from the World Input-Output Database, this paper considers the impact of offshoring and inshoring on the volatility of employment and wage growth. Our results indicate that inshoring has a positive impact on sectoral employment volatility, while offshoring has a negative impact. Additional results indicate that much of the positive volatility effect of inshoring is found to occur in countries in East Asia and the EU12, regions that are important destinations for offshoring activities. Conversely, the negative volatility effect of offshoring is found to occur mainly in EU15 and Other' countries, which consists of developed countries that are relatively intensive offshorers. We also present results to suggest that firms smooth employment fluctuations by offshoring, and that such smoothing tends to be concentrated on low-educated and medium-educated workers.