Impacts of Service Offshoring on Productivity and Employment: Evidence from Korea

This paper estimates the effects of service offshoring on productivity and employment in Korean manufacturing industries during the period from 1995 to 2005. It applies a dynamic panel approach to address the potential endogeneity problem. We find that service offshoring has a significant positive impact of productivity, but no significant effects on total employment. Considering that the responses of heterogeneous labor to service offshoring may be different, we separately estimate the impacts of service offshoring on white-collar and blue-collar employment. The empirical results show that service offshoring raises white-collar employment, but has no significant effects on blue-collar employment. Finally, we find that material offshoring lowers blue-collar employment.