Task trade and employment patterns: The offshoring and onshoring of Brazilian firms

Abstract

ABSTRACTThe present paper tackles the question whether firms in a middle-wage country offshore production to save labor costs or if they onshore tasks that were offshored from high-wage countries. To distinguish which is the empirically more relevant case, I analyze the effect of importing intermediate inputs on the labor composition using matched employer–employee data and information on trade transactions from the universe of Brazilian firms. Propensity score matching indicates that an intermediate import expansion at the extensive margin leads to employment growth, higher intensities in routine and non-routine manual tasks and an increased share of intermediates exports. These findings thus point out that Brazil's intermediate imports predominantly represent onshored tasks. This result holds regardless of whether intermediate imports from high- or low-wage countries are considered. In line with theoretical considerations, the data show that Brazil's comparative advantage is in medium-complex and routine manual intensive production stages.