Abstract

This paper estimates the effect of international outsourcing of materials and services on productivity in Italian manufacturing sectors during the period 1985-1997. Three different measures of outsourcing are used. Firstly, a "narrow" measure of outsourcing is calculated as the intensity of intermediate inputs that each sector imports from the same sector abroad. Secondly, a "broad" measure of outsourcing of materials is calculated as the intensity of materials imported from non-energy manufacturing sectors abroad. Finally, outsourcing of services is measured as the total imported business and financial services. Outsourcing is modelled as to affect TFP and the results suggest a general positive effect of outsourcing of materials. The effect of outsourcing of services seems to be ambiguous: it is positive for the traditional sectors and negative for the advanced sectors.