Multinational firms outsourcing or offshoring their operations to developing countries is a problem as old as globalisation. This column looks at the effect on high-skilled labour in the home country. It presents evidence that, on average, when firms start employing high-skilled workers offshore, they also increase the number of this type of worker employed at home.
It has been well documented that US and European multinationals have expanded the amount of high-tech investment and innovative activities carried out offshore (OECD 2008). There is evidence that firms may offshore innovation activities not only to adapt products to local conditions but also to develop state-of-the-art technology.
Authors
Rachel Griffith
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Laura Abramovsky
Laura is a Research Fellow at IFS. Her current work focuses on tax and social protection policy and programme evaluation in developing countries.
Helen Miller
Helen is Deputy Director of the IFS and Head of the Tax sector.
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