DP10864 Offshoring and Skill-upgrading in French Manufacturing: A Heckscher-Ohlin-Melitz View
|Author(s):||Juan Carluccio, Alejandro Cuñat, Harald Fadinger, Christian Fons-Rosen|
|Publication Date:||October 2015|
|Keyword(s):||firm-level factor intensities, Heckscher-Ohlin, heterogeneous firms, offshoring|
|JEL(s):||F11, F12, F14|
|Programme Areas:||Industrial Organization, International Trade and Regional Economics|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10864|
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.