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This paper examines empirically the economic effects of outsourcing of service by using data between 1998 and 2007 of Dalian city, which has witnessed significant outsourcing of service activity rapidly over the last decade. Results show that development of outsourcing has positive effects on labor demand, FDI and productivity, and outsourcing of service not only can be a direct contribution to economic growth in Dalian, but also a indirect contribution on economic growth through employment effect and foreign direct investment attraction effect. At the same time, we conclude that outsourcing of service industry in China is still a labor-intensive industry.
Date of Conference: 7-9 May 2010