This paper aims at analyzing the substitution effect of offshoring on domestic labor demand between 2000 and 2011, using data on 94 Italian manufacturing sectors estimated by merging balance accounts and international trade statistics at firm level and a proxy for international competition calculated according to most recent methodologies. The econometric analysis finds that in the whole period offshoring is negatively related to employment within sectors, particularly if related to low-wage countries and to traditional sectors, with major pressure shown in years preceding the last recession. Substitution effects seem strengthened by R&D expenditure in the medium term.
Keywords: Offshoring, Labor Demand, Low-wage Country Competition