Quantifying the Productivity Effects of Global Sourcing

39 Pages Posted: 10 Nov 2016

Date Written: July 21, 2016

Abstract

This work analyses the effect of the global sourcing of intermediate goods on productivity growth. To identify the impact of global sourcing, we employ the methodology proposed in a different context by Rajan and Zingales (1998). In particular we interact the length and the width of sectoral production chains with a measure of the intensity of countries’ intermediate imports. We find evidence indicating that off-shoring significantly increases labour productivity and total factor productivity at the sector level in countries that rely on global sourcing. The driver of total factor productivity growth depends on the structure of the global value chain that intermediates are sourced from: long chains trigger technology improvements while wide chains cause a reallocation of resources towards more productive firms within the same sector.

Keywords: productivity growth, global sourcing, global value chains

JEL Classification: D24, F62, F66

Suggested Citation

Formai, Sara and Vergara Caffarelli, Filippo, Quantifying the Productivity Effects of Global Sourcing (July 21, 2016). Bank of Italy Temi di Discussione (Working Paper) No. 1075, Available at SSRN: https://ssrn.com/abstract=2867450 or http://dx.doi.org/10.2139/ssrn.2867450

Sara Formai (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Filippo Vergara Caffarelli

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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