I provide new empirical evidence on the direct and indirect impact of services off-shoring on local employment and wages, using a unique dataset on firms in the UK for the period 2000-2015. Exploiting variation in firms' services offshoring across labour markets, I show positive aggregate local labour employment and wage elasticity to services offshoring. Spillovers from offshoring to non-offshoring firms explain the positive results, and services offshoring complementary to firms' production has a larger effect than the offshoring competing with firms' outputs. Finally, I show that services offshoring widens firms' employment and wage dispersion within local labour markets.

This work contains statistical data from the Office for National Statistics supplied by the UK Dataservice. The use of these data does not imply the endorsement of the ONS or the UK Data Service at the UK Data Archive in relation to the interpretation or analysis of the data. This work uses research datasets which may not exactly reproduce National Statistics aggregates. The author thanks the UK Dataservice for their assistance and the Economic and Social Research Council (award number ES/J500100/1) for financial support.

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9 December 2022     Paper Number CEPDP1892

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This CEP discussion paper is published under the centre's Trade programme.