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http://dx.doi.org/10.5762/KAIS.2013.14.10.4784

The Impact of Offshoring on Korean Firms' Productivity  

Park, Moon-Soo (Division of Service Industry Research, Korea Institute for Industrial Economics and Trade)
Kim, Hwa-Nyeon (Department of Global Studies, Samsung Economic Research Institute)
Lee, Kyung-Hee (Division of Employment Policy Research, Korea Labor Institute)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.14, no.10, 2013 , pp. 4784-4790 More about this Journal
Abstract
As with fast growing globalization, Korean firms have increased their offshoring activities and more empirical research are needed to analyze the effect of offshoring on Korean firms' productivity. This study used "Survey of Business Activities", a firm-level panel data set surveyed by the Statistics Korea between 2006 and 2008, and estimated pooled OLS and Panel fixed effect model to examine the impact of offshoring on a firm's labor productivity. Unlike the previous studies on offshoring, we included in the analyses the firms in the service industry in addition to those in the manufacturing industry, and presented the comparative results. The results from pooled OLS model show that 1% increase in the share of offshoring output will lead to 0.03% increase in labor productivity. However, the results from Panel model show that the effects of offshoring on productivity is positive but statistically insignificant. Analyzing the manufacturing and the service sector separately, the main results based on Panel model can be summarized as follows: Offshoring has significant positive effects on firms' productivity in the manufacturing industry. Contrastingly, the impact of offshoring on firms' productivity in the service industry is estimated to be negative but statistically insignificant. Other than the share of offshoring output, most factors except headquarter location have positive effects on firms' productivity in both manufacturing and service industry.
Keywords
Firm-level panel data; Labor productivity; Offshoring; Panel data model;
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