Service Offshoring and Productivity in Western Europe

Using comparable industry-level data for nine Western European countries, this paper finds that the international relocation of service activities (service offshoring) exerts positive and economically large effects on domestic productivity. A one percentage point increase in the proxy for service offshoring (i.e., the share of imported private services in total non-energy input purchases) is found to raise Total Factor Productivity by about 0.5%.Service Offshoring; Total Factor Productivity