International Outsourcing and Productivity: Evidence from Plant Level Data

This paper examines the effect of international outsourcing of intermediate inputs on labour productivity at the level of the plant that engages in outsourcing. To do so we use plant level data for the electronics industry in the Republic of Ireland. Using a fresh perspective on international outsourcing and productivity, we focus on the nature of outsourced inputs (services or tangibles) and the production stage (upstream or downstream) at which the plant engaged in outsourcing operates. We find significant productivity gains to internationally outsourced services. Most importantly, internationally outsourced services generate the highest productivity gains for downstream activities, where firms are closer to the end-customer. JEL classification: F16, F14, L23, L63