Working paper No. 282: Immigrant employment and the Contract Enforcement Costs of Offshoring

PublikationWorking paper
Andreas Hatzigeorgiou, Företagandets villkor, Internationell handel, Magnus Lodefalk, Migration, Nätverk, Patrik Karpaty, Richard Kneller
Ratio WP 282. New version
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Offshoring continues to be an important dimension of firms’ internationalization choices. However, offshoring also increases
contract enforcement costs by inhibiting the coordination and monitoring of performance. Immigrant employees may reduce
such costs through their specific knowledge of the employer, their country of birth and access to foreign networks. We develop
a heterogeneous firm framework with immigrants and offshoring costs, including technology leakage. In the model, immigrant
employees augment the supervisory services of headquarters and limit technology leakage, thereby reducing contract
enforcement costs. Then, we bring our conjectures to rich administrative Swedish microlevel data that include specific
information about the characteristics of employees, manufacturing firms and their bilateral offshoring. Our results support the
hypothesis that immigrant employees increase offshoring intensity by lowering contract enforcement costs. Hiring one
additional immigrant employee can increase offshoring by up to three percent on average, with the strongest effects found for
skilled immigrant employees.

Hatzigeorgiou, A., Karpaty, P., Kneller, R., & Lodefalk, M. (2016). Do Immigrants Spur Offshoring? Firm-Level Evidence. Ratio Working Paper No. 282. Stockholm: Ratio.

Liknande innehåll

A Literature Review of the Nexus between Migration and Internationalization
Artikel (med peer review)Publikation
Hatzigeorgiou, A. & Lodefalk, M.



Protectionism and anti-globalization tides have been rising already before the COVID-19 pandemic, with Brexit and the China-U.S. trade war, as two examples. A continued disruption to global trade, investment and value chains could worsen global development. Economic recovery will require restoring firms’ ability to trade, offshore and invest globally. To achieve this, it will be useful to understand the role of migration for foreign trade, investment and other aspects of internationalization. In this paper we review and discuss over 100 papers published about migrants’ roles on international trade, foreign direct investment and offshoring. Although the evidence suggests that migration facilitates trade and internationalization, we also note substantial gaps and inconsistencies in the existing literature. The aim of this paper is to encourage further research and assist policymakers in their efforts to promote economic recovery including internationalization.

Ratio Working Paper No. 335 International Trade and Labor Market Integration of Immigrants
Working paperPublikation
Lodefalk, M., Sjöholm, F. & Tang, A.


Publicerat i

Ratio Working Paper


We examine if international trade improves labor market integration of immigrants in Sweden. Immigrants participate substantially less than natives in the labor market. However, trading with a foreign country is expected to increase the demand for immigrants from that country. By hiring immigrants, a firm may access foreign knowledge and networks needed to overcome information frictions in trade. Using granular longitudinal matched employer–employee data and an instrumental variable approach, we estimate the causal effects of a firm’s bilateral trade on employment and wages of immigrants from that country. We find a positive, yet heterogeneous, effect of trade on immigrant employment but no effect on immigrant wages.

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