Offshoring and Skill-Upgrading in French Manufacturing: A Heckscher-Ohlin-Melitz View
56 Pages Posted: 13 Oct 2015
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Offshoring and Skill-Upgrading in French Manufacturing: A Heckscher-Ohlin-Melitz View
Offshoring and Skill-Upgrading in French Manufacturing: A Heckscher-Ohlin Melitz View
Date Written: October 2015
Abstract
We present a factor-proportions trade model in which heterogeneous firms can offshore intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high-productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant countries than low-productivity firms. Differently from the traditional versions of factor-proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading to endogenous variation in skill intensity across firms that is positively correlated with firm productivity. Using French firm-level data for the years 1996 to 2007, we provide empirical support for the factor proportions channel through which offshoring to labor-abundant countries affects the firm-level skill intensities of French manufacturers.
Keywords: firm-level factor intensities, Heckscher-Ohlin, heterogeneous firms, offshoring
JEL Classification: F11, F12, F14
Suggested Citation: Suggested Citation