Offshoring and Immigrant Employment - Firm-Level Theory and Evidence

Abstract

In a large sample of Italian firms we find that imm igrant employment and production offshoring covary positively across geographic locations, but appear alternative to each other at the firm level. We develop a theoretical framework consistent with such evidence, based on i nterplay of heterogeneous productivities and fixed costs of production offsho ring. The model realistically assigns an important role to the skill intensity of activities that may or may not be offshored. Controlled regressions aimed at asses sing the relevance of the model's theoretical mechanisms confirm that, in our sample, offshoring is more likely for larger firms, and indicate that the dome stic facilities of firms that do offshore some of their production employ both a lar ger share of skilled personnel and a lower share of migrant workers.