Offshoring and skill-upgrading in French manufacturing: A Heckscher-Ohlin-Melitz view

Juan Carluccio, Alejandro Cunat, Harald Fadinger, Christian Fons-Rosen

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.

Department of Economics
External organisation(s)
Universität Mannheim, Foundation Banque de France, University of Surrey, University Pompeu Fabra
No. of pages
Publication date
Austrian Fields of Science 2012
502013 Industrial economics, 502003 Foreign trade
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