Magli, Martina
(2019)
Essays on services offshoring.
PhD thesis, University of Nottingham.
Abstract
This thesis provides a comprehensive description of trends and patterns in trade in services, and then proceeds to an in-depth analysis of the average and distributional effects of services offshoring -- defined as the imports of intermediate services from abroad -- on local labour markets. The first essay (chapter 2) is an extended introduction to trade in services and to the unique dataset used in the remainder of the thesis. The second and third essays (chapters 3 and 4 respectively) are dedicated to the empirical study of changes in employment levels and wages in those local labour markets from where the offshoring of services originates.Differently from the rest of the literature, the analysis takes into account both the direct effects (on the firms importing services), and the indirect effects (e.g. imitation, supply chain effect, change in competition) of services offshoring.
Chapter 2 documents the extent to which trade in services has become relevant in the World economy. It first discusses and clarifies issues regarding the definition of services trade, and presents the characteristics that distinguish it from trade in goods. It then documents the increased importance of services trade both in absolute terms and relative to trade in goods, a trend that is not restricted to developed economies but that is present in many developing countries as well. The cross-country descriptive analysis is complemented with more disaggregated evidence: Using detailed data on UK firms, I describe the characteristics of those firms involved in trade in services, and explore the underlying trade flows for the period 1999-2012. It emerges that firms that are larger, pay higher wages and that are more productive tend to be those that are involved in trade in services, and that these firms are distributed across all industries.
In chapter 3, I then estimate the impact of services offshoring on local labour markets. Being able to precisely locate each firm's plant, I exploit the variation in services offshoring across local labour markets that originates from the uneven geographical distribution of firms. The analysis is conducted in two stages. On aggregate, I show that there is a positive elasticity of local employment, average wage and productivity to services offshoring, suggesting positive effects on local labour markets.Taking the analysis to a more disaggregated level suggests that this is driven not only by direct effects, but also by spillover effects: For both the firms involved in services offshoring directly, as well as for those not involved in offshoring themselves but located in the same labour market as the offshoring firms, there is positive elasticity of employment and average wage to services offshoring. Further, a decomposition of the spillover effects suggests that the channel through which services offshoring affects firms indirectly is supply chain linkages.
Finally, chapter 4 is dedicated to the distributional analysis of services offshoring on local labour markets. Using recent developments in quantile analysis, I show that more productive firms are those gaining the most in terms of employment and wages from services offshoring. Further, differences in the effects of services offshoring along the productivity distribution persist when keeping the composition of the quantiles constant (that is, using the initial distribution of firms in terms of productivity). In line with the finding that services offshoring increases the differences between firms in local labour markets, I find suggestive evidence of increases in wage inequality -- measured as the dispersion of firms' average wages -- as a consequence of services offshoring.
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