Offshoring and Changes in Firms’ Domestic Employment: The Case of Denmark

In this study, we investigate the difference in changes in employment between offshoring and non-offshoring firms that are active in manufacturing industries and business services in Denmark. We measure the mean difference on a set of employment characteristics, i.e. employment growth, growth in high skilled employees, and growth in employees with a background in science and engineering, by using a partial propensity score matching approach. The findings of the analyses show that there are clear differences between Danish offshoring and non-offshoring firms in how the employee composition changes over time. Offshoring does not only lead to a fewer low skilled employees, but also lead to a lower growth of high skilled employees and a shift in the composition towards business educations and management positions compared to similar non-offshoring firms. The change in employment composition differs considerably between manufacturing industries and business services and on whether firms’ offshore administrative and technical business functions or other types of business functions.