The double dark side of regional back-shoring

Interpreted as a solution to employment and productivity stagnation and, more recently, to protect the EU economy from undesirable and critical dependence, back-shoring is strongly advocated by the European Union in its “Open Strategic Autonomy”. However, the effects of industrial activities brought back to their initial location are not just positive. The phenomenon hides potentially negative consequences that need to be highlighted in order to be anticipated and tackled with mitigating policies. The aim of this paper is to measure the social consequences of back-shoring at the local level. By measuring the effect that back-shoring has on wages of high- vs low-skilled workers in the manufacturing sector at NUTS2 level, a “double dark side” of back-shoring emerges. The results show in fact that within regions, back-shoring has a negative effect on low-skilled workers’ wages and a neutral effect on high-skilled ones. Moreover, it shows that the detrimental effects of back-shoring on low-skilled workers concentrates in less economically developed areas, while the beneficial ones on high-skilled workers concentrates in more developed area. These results suggest an increase in both intra and inter regional disparities. The awareness of the existence of such costs is important to anticipate and tackle the potential negative effects through mitigating policies.