Daniel Reyes, Georgetown, for research assistance. We thank Belinda Bonds of the Goods and Distributive Services Branch at the Bureau of Economic Analysis for assistance. Some of the analysis in this paper was conducted at the Center for Economic Studies, U.S. Census Bureau. The results have not undergone the review accorded Census Bureau publications and no endorsement should be inferred. Any opinions and conclusions expressed herein are those of the author(s) and do not necessarily represent the views of the U.S. Census Bureau or the NBER. All results have been reviewed to ensure that no confidential information is disclosed

The economic effects of offshoring have been subject to extensive empirical analysis in the past, but many studies have not accurately distinguished between offshoring, domestic outsourcing, and the substitution of domestic by foreign suppliers. In this study I provide stylized facts on offshoring in Europe between 1995 and 2008 taking into account this distinction. I show that service inputs have been offshored and domestically outsourced, whereas material inputs have been either offshored or moved from domestic to foreign suppliers. The strong overall decline in the share of internal production evokes the question whether this has led to productivity gains within firms. I address this question by combining industry-level data on offshoring and domestic outsourcing with a firm panel. I find that offshoring of non-core activities has led to productivity gains whereas offshoring of core activities and domestic outsourcing have had no such effects. The estimated productivity gains are in particular driven by offshoring to low-wage countries and by the gains of multinational firms.

Offshoring and intellectual property rights re a b, es t ct a es f y of ans ra-i er, high-tech (patent-sensitive) industries substantially expand their intra-industry as low-tech (patent-insensitive) industries do not change their intra-industry offshoring relative to low-tech industries, but the effects are smaller and less robust than those estimated for intra-industry offshoring. © 2014 Elsevier B.V. All rights reserved. trade p atically tellectu essary trade, a phenomenon ifically, Northern pro-