The Impacts of Offshoring on Productivity: Evidence in Korean Manufacturing

This paper estimates the effects of materials and services offshoring onproductivity in the Korean manufacturing industries from 2000 to 2009 using panelgeneralized method of moments. The production function has been employedin order to estimate the impact of both materials and services offshoring onindustry-level productivity. The empirical results show that service offshoring hasa significant positive effect on labor productivity, while materials offshoring hasnon-significant effect on labor productivity in Korean manufacturing. However,there is not enough evidence to suggest that total factor productivity ofmanufacturing sectors in Korea benefited from both materials and servicesoffshoring. In particular, a positive link between trade specialization and productivityis non-significant in the Korean manufacturing industries over the sample period.