Labour Market Effects of International Fragmentation of Production; Evidence from a Survey and Case Studies in the Dutch Industry

Arbeitspapier

In this era of globalisation the traditional Ricardian theory of trade in products governed by comparative advantages is replaced by a modern theory of trade in tasks. Tasks are outsourced to those places in the world where the lower production costs outweigh the additional transaction costs associated with coordinating the tasks. The labour market consequences of this outsourcing of tasks is a major concern, both for the country that outsources tasks and for the country to which tasks are outsourced. This paper discusses the labour market effects of outsourcing in the Netherlands using a survey amongst human research officers and in depth-interviews with the strategic management of seven industrial companies. The interviews and survey make clear that a major motive for outsourcing is to organise production in such a way that total production costs are minimized. More outsourcing requires more coordination but the reduction of costs due to producing at a cheap location outweigh the increase in transaction costs so that total production costs fall and productivity increases. However, it brings about a change in the composition of jobs in the outsourcing country: less workers are engaged in sheer production jobs, but more workers have transaction jobs. The net effect on total employment is uncertain, but our survey and interviews show that outsourcing should not necessarily be associated with a loss of jobs.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 13-136/VI

Classification and Topics

• Classification: Wirtschaft ; Empirical Studies of Trade ; Labor Force and Employment, Size, and Structure ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Organization of Production ; Production Management
• Subject: Globalization ; labour market ; transformation jobs ; transaction jobs ; outsourcing ; managing transaction costs ; new institutional economics.

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Berghuis, Ebel ; den Butter, Frank A.G.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/87304
• Last update: 10.03.2025, 11:41 AM CET