We present a factor-proportions trade model in which heterogeneous firms can offshore
intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high-
productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant
countries than low-productivity firms. Differently from the traditional versions of factor-
proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading
to endogenous variation in skill intensity across ...
We present a factor-proportions trade model in which heterogeneous firms can offshore
intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high-
productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant
countries than low-productivity firms. Differently from the traditional versions of factor-
proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading
to endogenous variation in skill intensity across firms that is positively correlated with firm
productivity. Using French firm-level data for the years 1996 to 2007, we provide empirical
support for the factor proportions channel through which offshoring to labor-abundant
countries affects the firm-level skill intensities of French manufacturers.
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