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2010•MADOC (University of Mannheim)Requires access

IT outsourcing and employment growth at the firm level

Jörg Ohnemus

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Abstract

Outsourcing is widely associated with accompanied job losses in the outsourcing firm, at least in the short run. However, the medium and long run effects of outsourcing on employment growth might still be positive. This paper particularly focuses on IT outsourcing and its medium-term effects on employment growth. Therefore, a three year time period from 2003 to 2006 is analysed using German firm-level data and instrumental variable estimation. I find evidence that IT outsourcing has a positive effect on firms' employment growth rate. However, dividing the sample into manufacturing and service firms, a medium-term positive growth effect of IT outsourcing can only be observed for firms operating in the service sector.

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What this paper is about

Outsourcing is widely associated with accompanied job losses in the outsourcing firm, at least in the short run. However, the medium and long run effects of outsourcing on employment growth might still be positive. This paper particularly focuses on IT outsourcing and its medium-term effects on employment growth. Therefore, a three year time period from 2003 to 2006 is analysed using German firm-level data and instrumental variable estimation. I find evidence that IT outsourcing has a positive effect on firms' employment growth rate. However, dividing the sample into manufacturing and service firms, a medium-term positive growth effect of IT outsourcing can only be observed for firms operating in the service sector.

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Available abstract

Outsourcing is widely associated with accompanied job losses in the outsourcing firm, at least in the short run. However, the medium and long run effects of outsourcing on employment growth might still be positive. This paper particularly focuses on IT outsourcing and its medium-term effects on employment growth. Therefore, a three year time period from 2003 to 2006 is analysed using German firm-level data and instrumental variable estimation. I find evidence that IT outsourcing has a positive effect on firms' employment growth rate. However, dividing the sample into manufacturing and service firms, a medium-term positive growth effect of IT outsourcing can only be observed for firms operating in the service sector.

Key concepts: Outsourcing, Business, Sample (material), Knowledge process outsourcing, Service (business), Labour economics, Instrumental variable, Tertiary sector of the economy

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