Service Offshoring and White-Collar Employment

This paper empirically studies the effects of service offshoring on white-collar employment, using data for more than 100 US occupations over the period 1997-2006. A model of firm behaviour based on separability allows derivation of the labour demand elasticity with respect to service offshoring for each occupation. Estimation is performed with quasi-maximum likelihood, to account for high degrees of censoring in the employment variable. The estimated elasticities are then related to proxies for the skill level and the degree of tradability of the occupations. Results suggest that service offshoring is skill-biased, because it increases employment in more skilled occupations relative to less skilled occupations. At a given skill level, however, service offshoring penalizes tradable occupations relative to non-tradable occupations.