Thursday, July 03, 2008
[IWS] ILO: COSTA RICA: OFFSHORING & EMPLOYMENT in the DEVELOPING WORLD [
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
International Labour Organization (ILO)
Employment Analysis and Research Unit
Economic and Labour Market Analysis Department
Employment Sector
Employment Working Paper No. 4 2008
Offshoring and employment in the developing world: The case of Costa Rica
Christoph Ernst and Diego Sánchez-Ancochea
http://www.ilo.org/public/english/employment/download/wpaper/wp4.pdf
Abstract:
This paper evaluates the impact of offshoring activities, particularly in the manufacturing sector, in the creation of quality employment
through a detailed analysis of the Costa Rican experience. This country constitutes a particular interesting case study. The country began
participating in the global apparel commodity chain in the early 1980s, when the Reagan administration introduced the Caribbean Basin
Initiative. During the 1990s, Costa Rica adopted a selective policy of promoting high tech foreign direct investment, and succeeded in
attracting Intel and other large multinational corporations.
Through a detailed analysis of the direct and indirect effects of offshoring on the quantity and quality of employment, we make two central
arguments. First of all, foreign investment in offshoring activities in Costa Rica has contributed to the expansion of skilled, well paid jobs,
particularly since the arrival of Intel and other high tech companies. Secondly, offshoring activities have created some spillovers into other
areas of the economy. Nevertheless, offshoring activities have remained relatively marginal in the overall economy, even in the
manufacturing sector. Offshoring activities are characterized by higher productivity, but create just a small number of direct and indirect
jobs. Building new linkages between offshoring production and the rest of the economy and expanding the technological capabilities of
small and medium firms have become an urgent but difficult challenge for the Costa Rican economy.
Contents
1. Introduction.................................................................................................................................... 1
2. Offshoring and the new economic model in the Costa Rican economy ......................................... 2
2.1 The role of offshoring in the creation of the new export structure ........................................... 4
2.2 Offshoring and employment: direct implications...................................................................... 8
A. The evolution of offshoring employment by sector and skill ............................................ 8
B. The technological content of employment ...................................................................... 11
C. Productivity and wages .................................................................................................. 12
3. Offshoring and employment: its relevance for the Costa Rican economy .......................................... 15
3.1 Employment ........................................................................................................................... 15
3.2 Wages.................................................................................................................................... 17
3.3 Skill level ............................................................................................................................... 17
3.4 Technology............................................................................................................................ 19
3.5 A new phenomenon: Rising offshoring in services ............................................................... 20
3.6 The creation of linkages and spillovers .............................................................................. 21
A. Linkages ......................................................................................................................... 21
B. Spillovers ........................................................................................................................ 24
4. The successes and challenges of offshoring in Costa Rica ................................................................. 26
4.1 Costa Rica's success in developing new offshoring activities ............................................... 26
A. Selective promotion of foreign investment ..................................................................... 26
B. Long term accumulation of intangible assets................................................................. 27
4.2 The challenges: how to expand the potential positive effects of offshoring.......................... 27
A. The learning challenge: technology and skills............................................................... 28
B. The challenge of public revenues .................................................................................. 29
C. The external challenge: The emergence of China......................................................... 30
5. Conclusions ........................................................................................................................................ 32
References .............................................................................................................................................. 33
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
International Labour Organization (ILO)
Employment Analysis and Research Unit
Economic and Labour Market Analysis Department
Employment Sector
Employment Working Paper No. 4 2008
Offshoring and employment in the developing world: The case of Costa Rica
Christoph Ernst and Diego Sánchez-Ancochea
http://www.ilo.org/public/english/employment/download/wpaper/wp4.pdf
Abstract:
This paper evaluates the impact of offshoring activities, particularly in the manufacturing sector, in the creation of quality employment
through a detailed analysis of the Costa Rican experience. This country constitutes a particular interesting case study. The country began
participating in the global apparel commodity chain in the early 1980s, when the Reagan administration introduced the Caribbean Basin
Initiative. During the 1990s, Costa Rica adopted a selective policy of promoting high tech foreign direct investment, and succeeded in
attracting Intel and other large multinational corporations.
Through a detailed analysis of the direct and indirect effects of offshoring on the quantity and quality of employment, we make two central
arguments. First of all, foreign investment in offshoring activities in Costa Rica has contributed to the expansion of skilled, well paid jobs,
particularly since the arrival of Intel and other high tech companies. Secondly, offshoring activities have created some spillovers into other
areas of the economy. Nevertheless, offshoring activities have remained relatively marginal in the overall economy, even in the
manufacturing sector. Offshoring activities are characterized by higher productivity, but create just a small number of direct and indirect
jobs. Building new linkages between offshoring production and the rest of the economy and expanding the technological capabilities of
small and medium firms have become an urgent but difficult challenge for the Costa Rican economy.
Contents
1. Introduction.................................................................................................................................... 1
2. Offshoring and the new economic model in the Costa Rican economy ......................................... 2
2.1 The role of offshoring in the creation of the new export structure ........................................... 4
2.2 Offshoring and employment: direct implications...................................................................... 8
A. The evolution of offshoring employment by sector and skill ............................................ 8
B. The technological content of employment ...................................................................... 11
C. Productivity and wages .................................................................................................. 12
3. Offshoring and employment: its relevance for the Costa Rican economy .......................................... 15
3.1 Employment ........................................................................................................................... 15
3.2 Wages.................................................................................................................................... 17
3.3 Skill level ............................................................................................................................... 17
3.4 Technology............................................................................................................................ 19
3.5 A new phenomenon: Rising offshoring in services ............................................................... 20
3.6 The creation of linkages and spillovers .............................................................................. 21
A. Linkages ......................................................................................................................... 21
B. Spillovers ........................................................................................................................ 24
4. The successes and challenges of offshoring in Costa Rica ................................................................. 26
4.1 Costa Rica's success in developing new offshoring activities ............................................... 26
A. Selective promotion of foreign investment ..................................................................... 26
B. Long term accumulation of intangible assets................................................................. 27
4.2 The challenges: how to expand the potential positive effects of offshoring.......................... 27
A. The learning challenge: technology and skills............................................................... 28
B. The challenge of public revenues .................................................................................. 29
C. The external challenge: The emergence of China......................................................... 30
5. Conclusions ........................................................................................................................................ 32
References .............................................................................................................................................. 33
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 5:51 AM
