This  study  examines  the  economic  contributions of offshore IT outsourcing (or IT offshoring for short) by  using  an  extended  Cobb-Douglas  production  function, and a panel data set from 20 OECD countries over the 2000 to 2006 period. The analysis indicates that IT offshoring has made  a  positive  and  significant  contribution  to  national productivity. Previous  research  on  IT  offshoring  has  relied on  case  studies  and  practitioners’  perceptions.  In  addition, the analysis supports the idea of economic integration. Thus, it sheds some light on the debate about whether IT offshoring  is  harmful  or  beneficial  to  a  national  economy.  The authors also investigate total factor productivity and the moderating effect  of  IT  intensity  on  the  degree  and  impacts  of  IT  offshoring. They apply feasible generalized least squares and the Durbin-Wu-Hausman  endogeneity  test  to  handle  context-specific  estimation  issues.  The  results  suggest  that  to  reap greater  value  from  IT  offshoring,  developed  countries need to establish IT capabilities by investing in IT capital.