We study the phenomena of offshoring, understood as the import of intermediate goods and services. First, we quantify it for the US and Spain, and show it was continuosly growing for the last decades, remarkably, for offshoring of services. Between 1995 and 1999 the annual average growth rate of the offshoring measure for Spain was 3.38%. In particular, it reached 10.35% for offshoring of services and 2% for offshoring of manufactures. However, this growth rate became negative in the 2000-2004 period (–1.79%). Hence, it seems the growth of offshoring has ended in deadlock, possibly due to the slow and discontinuous reductions in the transaction costs.

In addition, we expose the most recent empirical results on offshoring and its effects in the domestic labor market. Particularly, the results show an increase in the wage gap between skilled and unskilled workers, as well as an increase in all domestic workers' wages, and a decrease in the domestic employment rate. Finally, we argue about other effects in the domestic economy, such as the increase in its productivity. We conclude that this improvement in productivity could ensure a favorable long term effect in the domestic economy, balancing the potential adverse initial effects on the economy.

JEL Codes: F16, J31

Keywords: offshoring, transaction costs, wage gap, productivity.

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