The growth in offshoring and its economic effects have been subject to extensive empirical analysis. Yet, many studies do not accurately distinguish between offshoring, domestic outsourcing, and a substitution of domestic suppliers by foreign suppliers. In the present study I provide stylized facts on offshoring in Western Europe taking into account this important distinction. I show that services which were previously done internally have been partly moved out to domestic and foreign suppliers. For material inputs, by contrast, I find also evidence of systematic supplier changes. Overall the share of internal production has gone down by 4.5 percentage points between 1995 and 2008, which raises the question whether firms achieved productivity gains through this specialisation effort. I address this question by combining industry-level offshoring data with a firm panel. I find that service offshoring and offshoring of non-core activities have contributed to an increase in productivity and that this effect has been stronger for multinational firms.
- domestic outsourcing