Offshoring and Mental Health: Towards an Employee Perspective

This paper analyses the relationship between offshoring and employee mental health. We use the job demands-resources framework to argue that increasing job complexity and insecurity due to offshoring negatively affect home-country employees' mental health. In addition, we hypothesize that this effect is heterogeneous among firms and depends on the mode and motives of offshoring. We construct a comprehensive panel data set from the Netherlands and use psychotropic medication prescriptions of individuals combined with the 'Global Value Chains' offshoring survey among 2500 Dutch firms. The findings suggest a negative and long-lasting effect of offshoring on the medication usage of employees, especially when firms retain ownership of foreign operations. Contrary to our expectations, this negative effect is smaller rather than larger when cost-saving motives mainly drive offshoring.