Title: Quantifying the productivity counterpart of outsourcing in the Italian manufacturing industries
1Quantifying the productivity counterpart of
outsourcing in the Italian manufacturing
industries
- F. Daveri - M. Iommi - C. Jona-Lasinio
- OECD Productivity Workshop
- Bern, 16-18 October, 2006
2Motivation
- Growing importance of international outsourcing
of services in Western economies. - Evidence that both offshoring of services and of
material inputs are associated with productivity
gains - Amiti and Wei, 2006 Girma and Gorg, 2004
Criscuolo and Leaver, 2005. - Outsourcing as such, irrespective of where to,
should be associated to productivity growth - Italy was largely missing from previous research
on this topic. - Availability of new symmetric I-O tables.
3Our aims
- Quantify the extent of domestic and international
outsourcing in the Italian manufacturing sector. - Provide a comparison between direct and indirect
measures of outsourcing. - Evaluate the productivity counterpart of
outsourcing.
4Data
- Symmetric input-output tables (industry by
industry matrix) - At the 60-sector level (according to the NACE
Rev1.1 classification) - Time period 1995-2003
- Focus on domestic and international outsourcing
of manufacturing intermediates and services for
14 manufacturing industries - Our broad - definition of market service
providers - transports, storage and communications
- finance and insurance
- real estate and other business services
5LP in manufacturing abrupt but scattered
slowdown (ND first, then D)
1970-80 1980-95 1995-03 1995-00 2000-03
Manufacturing 2.8 3.0 0.2 1.0 -1.0
Non-durables 2.7 3.1 0.3 0.7 -0.2
Durables 2.9 2.7 0.0 1.7 -2.7
6TFP in manufacturing same pattern as LP
1970-80 1980-95 1995-03 1995-00 2000-03
Manufacturing - 1.6 -0.5 0.3 -1.7
Non-durables - 1.8 -0.5 -0.2 -1.0
Durables - 1.2 -0.5 1.3 -3.4
7Measures of international and domestic outsourcing
- OSMiD Sj DOMESTIC INPUT PURCHASES OF MATERIAL j
by IND. i / TOTAL NON-ENERGY INPUTS USED BY
INDUSTRY i - OSSiD Sj DOMESTIC PURCHASES OF SERVICE INPUT j
by INDST. i / TOTAL NON-ENERGY INPUTS USED BY
INDUSTRY i - OSMiF Sj IMPORT OF MATERIAL j by INDST. i /
TOTAL NON-ENERGY INPUTS USED BY
INDUSTRY i - OSSiF Sj IMPORT OF SERVICE INPUT j by INDST. i
/ TOTAL NON-ENERGY INPUTS USED BY
INDUSTRY i -
8Domestic outsourcing of intermediates (OSMD)
down in 1995-03
Table 1 Domestic outsourcing of intermediate products in Italys manufacturing industries Table 1 Domestic outsourcing of intermediate products in Italys manufacturing industries Table 1 Domestic outsourcing of intermediate products in Italys manufacturing industries Table 1 Domestic outsourcing of intermediate products in Italys manufacturing industries Table 1 Domestic outsourcing of intermediate products in Italys manufacturing industries Table 1 Domestic outsourcing of intermediate products in Italys manufacturing industries Table 1 Domestic outsourcing of intermediate products in Italys manufacturing industries
points 1995 1999 2003 ?(1995-99) ?(1999-03) ?(1995-03)
Food products and tobacco 26.8 26.1 25.6 -0.7 -0.5 -1.1
Textiles and clothing 53.1 49.0 43.8 -4.2 -5.2 -9.3
Leather and footwear 54.3 52.4 49.5 -1.9 -2.9 -4.8
Wood and wood products 52.9 52.8 50.6 -0.1 -2.2 -2.3
Paper, printing and publishing 37.5 36.3 33.9 -1.2 -2.4 -3.5
Coke and refined petroleum products 22.2 21.7 14.7 -0.5 -6.9 -7.5
Chemicals and chemical products 32.9 33.2 24.5 0.2 -8.7 -8.5
Rubber and plastic products 39.8 39.9 36.0 0.2 -3.9 -3.8
Other non-metallic mineral products 39.2 37.1 37.4 -2.1 0.3 -1.8
Basic metals and fabricated metal products 45.7 44.3 43.3 -1.4 -1.0 -2.4
Machinery and equipment n.e.c. 55.7 53.3 51.5 -2.4 -1.7 -4.2
Electrical and optical equipment 32.9 31.3 29.0 -1.6 -2.3 -3.9
Transport equipment 47.6 43.8 40.9 -3.8 -2.9 -6.7
Other mnfg. industries 45.5 47.2 44.7 1.7 -2.5 -0.8
Average manufacturing industry 41.9 40.6 37.5 -1.3 -3.1 -4.3
Source own calculation from ISTAT National Accounts Source own calculation from ISTAT National Accounts Source own calculation from ISTAT National Accounts Source own calculation from ISTAT National Accounts Source own calculation from ISTAT National Accounts Source own calculation from ISTAT National Accounts Source own calculation from ISTAT National Accounts
9Intnl outsourcing of intermediates (OSMF) up
in 1995-03
Table 2 International outsourcing of intermediates in Italys manufacturing industries Table 2 International outsourcing of intermediates in Italys manufacturing industries Table 2 International outsourcing of intermediates in Italys manufacturing industries Table 2 International outsourcing of intermediates in Italys manufacturing industries Table 2 International outsourcing of intermediates in Italys manufacturing industries Table 2 International outsourcing of intermediates in Italys manufacturing industries Table 2 International outsourcing of intermediates in Italys manufacturing industries
1995 1999 2003 ?(1995-99) ?(1999-03) ?(1995-03)
Food products and tobacco 8.5 8.5 9.3 0.0 0.8 0.8
Textiles and clothing 17.3 17.7 20.9 0.4 3.2 3.6
Leather and footwear 16.2 16.2 20.4 0.0 4.1 4.1
Wood and wood products 15.0 13.9 14.7 -1.1 0.8 -0.3
Paper, printing and publishing 21.5 18.2 18.0 -3.4 -0.1 -3.5
Coke and refined petroleum products 29.5 16.1 32.5 -13.5 16.4 2.9
Chemicals and chemical products 40.9 38.3 44.5 -2.5 6.1 3.6
Rubber and plastic products 29.9 27.3 29.1 -2.7 1.8 -0.8
Other non-metallic mineral products 11.9 10.6 10.0 -1.3 -0.6 -1.9
Basic metals and fabricated metal products 23.6 21.2 20.9 -2.4 -0.3 -2.7
Machinery and equipment n.e.c. 14.1 14.4 15.0 0.3 0.6 0.9
Electrical and optical equipment 32.3 30.5 31.0 -1.8 0.5 -1.4
Transport equipment 24.5 26.9 29.3 2.4 2.4 4.8
Other mnfg. industries 22.2 18.5 21.1 -3.7 2.6 -1.1
Average manufacturing industry 22.0 19.9 22.6 -2.1 2.7 0.7
Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts
10Domestic outsourcing of services (OSSD) up in
1995-03
Table 3 Domestic outsourcing of market services in Italys manufacturing industries Table 3 Domestic outsourcing of market services in Italys manufacturing industries Table 3 Domestic outsourcing of market services in Italys manufacturing industries Table 3 Domestic outsourcing of market services in Italys manufacturing industries Table 3 Domestic outsourcing of market services in Italys manufacturing industries Table 3 Domestic outsourcing of market services in Italys manufacturing industries Table 3 Domestic outsourcing of market services in Italys manufacturing industries
1995 1999 2003 ?(1995-99) ?(1999-03) ?(1995-03)
Food products and tobacco 9.8 11.8 14.0 2.0 2.3 4.2
Textiles and clothing 11.2 13.4 15.4 2.2 2.0 4.2
Leather and footwear 12.4 13.6 13.2 1.1 -0.4 0.8
Wood and wood products 14.6 15.8 18.0 1.2 2.2 3.4
Paper, printing and publishing 17.8 20.1 21.9 2.3 1.9 4.1
Coke and refined petroleum products 18.4 30.1 26.3 11.7 -3.8 7.9
Chemicals and chemical products 10.9 12.4 14.3 1.5 1.9 3.4
Rubber and plastic products 13.9 15.9 18.2 2.0 2.3 4.3
Other non-metallic mineral products 20.4 21.8 23.0 1.3 1.2 2.6
Basic metals and fabricated metal products 14.7 18.0 19.0 3.4 0.9 4.3
Machinery and equipment n.e.c. 13.9 15.9 16.8 2.0 0.9 2.8
Electrical and optical equipment 12.5 14.3 14.7 1.8 0.4 2.2
Transport equipment 12.3 13.4 13.5 1.1 0.1 1.2
Other mnfg. industries 14.4 15.8 16.4 1.3 0.6 2.0
Average manufacturing industry 14.1 16.6 17.5 2.5 0.9 3.4
Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts
11Intnl outsourcing of services (OSSF) mildly up
in 1995-03
Table 4 International outsourcing of market services in Italys manufacturing industries Table 4 International outsourcing of market services in Italys manufacturing industries Table 4 International outsourcing of market services in Italys manufacturing industries Table 4 International outsourcing of market services in Italys manufacturing industries Table 4 International outsourcing of market services in Italys manufacturing industries Table 4 International outsourcing of market services in Italys manufacturing industries Table 4 International outsourcing of market services in Italys manufacturing industries
1995 1999 2003 ?(1995-99) ?(1999-03) ?(1995-03)
Food products and tobacco 0.6 0.7 0.8 0.1 0.1 0.2
Textiles and clothing 1.0 1.2 1.4 0.2 0.2 0.4
Leather and footwear 1.1 1.3 1.3 0.2 0.1 0.2
Wood and wood products 1.5 1.5 1.7 0.0 0.2 0.2
Paper, printing and publishing 1.5 1.5 1.6 0.0 0.1 0.1
Coke and refined petroleum products 3.4 5.8 5.6 2.4 -0.2 2.2
Chemicals and chemical products 1.8 1.8 2.0 0.0 0.2 0.3
Rubber and plastic products 1.1 1.1 1.2 0.0 0.1 0.1
Other non-metallic mineral products 0.7 0.7 0.7 0.0 0.0 -0.1
Basic metals and fabricated metal products 0.6 0.7 0.7 0.1 0.0 0.1
Machinery and equipment n.e.c. 1.2 1.2 1.4 0.0 0.1 0.2
Electrical and optical equipment 3.7 4.8 5.3 1.1 0.5 1.6
Transport equipment 1.5 1.8 1.6 0.3 -0.2 0.1
Other mnfg. industries 1.5 1.6 1.8 0.1 0.2 0.3
Average manufacturing industry 1.5 1.8 1.9 0.3 0.1 0.4
Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts Source own calculation from ISTAT - National Accounts
12DIJ vs FH measures
- FH measure imputes average propensity to import
for the economy to each industry unwarranted
assumption justifed by data limitations - We have the right data to directly compute
offshoring - FH and DIJ measures are highly correlated
- Across industries r is 0.8 on average 1995-03
(but falls to .6 in - 1999-03)
- FH shares systematically lower than DIJ shares
- Feenstra-Hanson measures systematically
optimistic in evaluating extent of offshoring - Use of indirect outsourcing measures may bias
estimates
13Empirical specification
where GROWTHLPit is the growth rate of value
added per full-time equivalent employed worker in
industry i (with i1,..14) at time t (with
t1995,..,2003) GROWTHKLit is the growth rate of
the industry capital labor ratios OSS is the
outsourcing of services OSM is the outsourcing
of intermediates d and f mean domestic and
foreign
14Empirical results
Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries Table 5 Outsourcing and productivity growth in the Italian manufacturing industries
Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03) Dependent variable yearly growth rate of value added per full-time equivalent employed (14 industries, 1995-03)
WLS OLS WLS OLS WLS OLS WLS OLS WLS OLS WLS WLS
Our Osm, Oss Our Osm, Oss Feenstra Hanson Osm Feenstra Hanson Osm Lagged Osm, Oss Lagged Osm, Oss Lagged Feenstra Hanson Lagged Feenstra Hanson Our Osm, Oss Our Osm, Oss Feenstra- Hanson Lagged Osm, Oss
Growth of capital - labor ratio .39 (.11) .45 (.13) .36 (.12) .45 (.15) .31 (.13) .44 (.17) .36 (.17) .38 (.17) .43 (.13) .65 (.16) .41 (.13) .30 (.14)
?(OSM foreign) -.18 (.05) -.27 (.04) -.25 (.10) -.40 (.08) .10 (.05) .11 (.05) -.19 (.10) -.16 (.10)
?(OSS foreign) .03 (.03) -.03 (.04) .25 (.11) .39 (.11) -.02 (.04) -.02 (.05) .11 (.04) .09 (.04)
?(OSM domestic) .09 (.07) .00 (.06) .27 (.07) .23 (.06) -.08 (.09) -.04 (.08) -.12 (.09) -.11 (.08)
?(OSS domestic) -.32 (.10) -.56 (.11) -.54 (.18) -.89 (.18) .06 (.13) .02 (.14) -.14 (.16) -.15 (.18)
Interaction terms
RDOSMintnl .06 (.08) .02 (.10) .01 (.09) .02 (.09)
RDOSSintnl .00 (.02) -.00 (.02) .02 (.11) -.01 (.02)
RDOSMdom .20 (.10) .20 (.14) 16 (.07) -.08 (.11)
RDOSSdom -.00 (.09) -.02 (.12) -.04 (.12) .09 (.10)
Adjusted R-Squared .51 .58 .47 .51 .32 .27 .30 .29 .34 .50 .33 .26
RMSE .027 .034 .028 .036 .032 .041 .041 .042 .031 .037 .031 .316
observations 112 112 112 112 98 98 98 98 112 112 112 98
15Conclusions and future research
- Not all manufacturing industries outsource
production to the same extent either inside or
outside the country - Off-shore outsourcing took off in 1999-2003, not
before - Only the international outsourcing of
intermediates is positively related to
productivity growth, while the other forms of
outsourcing are not robustly related to
productivity growth
16Conclusions and future research
- Direct and indirect measures of outsourcing
provide different empirical results - The results obtained from our indicator of
outsourcing are quite different from those
arising from the commonly used Feenstra-Hanson
measures of outsourcing
17Conclusions and future research
- Disaggregate market services further
- Potential to do so I-O Table available with up
to 101 industries - Improve econometric techniques to more
satisfactorily deal with endogeneity issues
18Backup Slides
19FH vs DIJ OSM
20FH vs DIJ OSS
21FH measure of service outsourcing
22SYMMETRIC I-O TABLES
Domestic intermediates
Imported intermediates
Total intermediates
23SYMMETRIC I-O TABLES
Domestic use
24SYMMETRIC I-O TABLES
Imported use
I.P.I.
I.I.C.
Supply