Service Offshoring and Labor Demand in Europe

This chapter aims to shed new light on the labor-market implications of service offshoring by providing novel and extensive empirical evidence on how it affects the demand for labor in Western European countries. It studies two main channels through which service offshoring may affect labor demand. First, service offshoring may induce a parallel shift in the demand schedule. Second, it may change, and possibly increase, its slope (wage elasticity). These two channels may offer complementary explanations for why concerns about service offshoring are mounting in Western Europe. The chapter is organized as follows: Section 3 describes the data set and provides stylized facts on service offshoring and labor demand in Western Europe; section 4 introduces the empirical models; section 5 presents and discusses the results; and finally, section 6 briefly concludes.