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Revisiting the employment impact of offshoring

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  • Wright, Greg C.

Abstract

The productivity gains due to offshoring may, in part, accrue to workers. This paper estimates the magnitude of these gains and compares it to the magnitude of employment loss due to worker displacement. A model based on the production task framework from Grossman and Rossi-Hansberg (2008) is used to demonstrate that the effect of offshoring depends on the intensity of use of these tasks and, ultimately, impacts domestic employment through three channels: a direct displacement effect, which negatively impacts employment; an output effect generated by the productivity gains from offshoring, which reorganizes and increases aggregate production in the economy and impacts domestic employment positively; and a substitution effect among factors and tasks, which has an ambiguous effect. Using the model's structure as a roadmap and applying it to detailed U.S. manufacturing sector data over 2001–2007, results from GMM 3SLS regressions provide overall support for the structure and predictions of the tasks model of offshoring. In particular, the economic magnitude of the productivity gains is found to have been important.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 66 (2014)
Issue (Month): C ()
Pages: 63-83

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Handle: RePEc:eee:eecrev:v:66:y:2014:i:c:p:63-83

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Tasks offshoring; Offshoring and employment;

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References

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  1. Becker, Sascha O. & Ekholm, Karolina & Muendler, Marc-Andreas, 2009. "Offshoring and the Onshore Composition of Tasks and Skills," CEPR Discussion Papers 7391, C.E.P.R. Discussion Papers.
  2. Gianmarco I.P. Ottaviano & Giovanni Peri & Greg C. Wright, 2010. "Immigration, Offshoring and American Jobs," Working Papers 2010.145, Fondazione Eni Enrico Mattei.
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  4. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
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  7. David H. Autor & Frank Levy & Richard J. Murnane, 2001. "The Skill Content of Recent Technological Change: An Empirical Exploration," NBER Working Papers 8337, National Bureau of Economic Research, Inc.
  8. Alan S. Blinder & Alan B. Krueger, 2009. "Alternative Measures of Offshorability: A Survey Approach," Working Papers 1169, Princeton University, Department of Economics, Center for Economic Policy Studies..
  9. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
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  11. Moser, Christoph & Urban, Dieter M & Weder di Mauro, Beatrice, 2009. "Offshoring, Firm Performance and Establishment-Level Employment: Identifying Productivity and Downsizing Effects," CEPR Discussion Papers 7455, C.E.P.R. Discussion Papers.
  12. Alan S. Blinder, 2009. "How Many US Jobs Might be Offshorable?," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(2), pages 41-78, April.
  13. Alexandra Spitz-Oener, 2006. "Technical Change, Job Tasks, and Rising Educational Demands: Looking outside the Wage Structure," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 235-270, April.
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  15. Avraham Ebenstein & Ann Harrison & Margaret McMillan & Shannon Phillips, 2009. "Why are American Workers getting Poorer? Estimating the Impact of Trade and Offshoring Using the CPS," NBER Working Papers 15107, National Bureau of Economic Research, Inc.
  16. Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 907-940, August.
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Citations

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Cited by:
  1. Thede, Susanna, 2012. "A Simple Model of Trade, Job Task Offshoring and Social Insurance," Working Papers 2012:16, Lund University, Department of Economics.
  2. Kohler, Wilhelm & Wrona, Jens, 2011. "Offshoring tasks, yet creating jobs?," University of Tuebingen Working Papers in Economics and Finance 12, University of Tuebingen, Faculty of Economics and Social Sciences.
  3. Andrei Zlate & Federico Mandelman, 2013. "Offshoring, Low-skilled Immigration and Labor Market Polarization," 2013 Meeting Papers 1073, Society for Economic Dynamics.
  4. Mandelman, Federico S., 2013. "Labor market polarization and international macroeconomic dynamics," Working Paper 2013-17, Federal Reserve Bank of Atlanta.
  5. Cosimo BEVERELLI & Gianluca OREFICE & Nadia ROCHA, 2011. "Offshoring and migration in a world with policy spillovers," Departmental Working Papers 2011-25, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  6. Pol Antràs & Stephen R.Yeaple, 2013. "Multinational Firms and the Structure of International Trade," NBER Working Papers 18775, National Bureau of Economic Research, Inc.
  7. Hogrefe, Jan, 2013. "Offshoring and relative labor demand from a task perspective," ZEW Discussion Papers 13-067, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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