Offshoring components and their effect on employment: firms deciding about how and where

Firms must take two fundamental decisions: how and where to produce. Traditional measures of offshoring include information on both decisions but cannot distinguish between them. In this article, we attempt to distinguish the evolution of the requirement of inputs per unit of output (how to produce) from the delocalization of production to others countries (where to produce). We call global technical change to the first element and net offshoring to the second. We further decompose net offshoring into net inter-industry substitution and intra-industrial offshoring (replacement of domestic inputs for imported ones from the same sector). This last measure quantifies better the concept of delocalization of production to other countries looking for lower costs, the original idea behind offshoring. This decomposition allows us to further investigate on whether technical change or net offshoring is the main factor in recent Spanish industrial employment changes.