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Captive offshoring by US multinationals: measuring the domestic employment impacts of vertical FDI

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  • J.K. Mullen
  • Martin Williams
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    Abstract

    The complex nature of ‘international outsourcing’ makes it difficult to quantify its employment and broader impacts on national economies. Indeed, available evidence on the extent of ‘offshoring’ by US firms is scant, rendering analyses of its economic impacts as largely unreliable. Attempts to gauge its domestic employment effects have been limited both by definitional problems and data limitations, even when the immeasurable dimensions of offshoring are ignored. This work offers a quantitative assessment of the importance of ‘captive offshoring’ in relation to the entire US economy. Using government data that report foreign affiliate sales back to US parents, we provide ‘back of the envelope’ estimates of the domestic employment effects of vertically motivated foreign direct investment. Although this trend has accelerated most rapidly within the services sector, the findings suggest that ‘high-tech’ manufacturing industries are a major and growing source of job loss.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Economics and Business Research.

    Volume (Year): 4 (2012)
    Issue (Month): 1/2 ()
    Pages: 21-34

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    Handle: RePEc:ids:ijecbr:v:4:y:2012:i:1/2:p:21-34

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    Web page: http://www.inderscience.com/browse/index.php?journalID==310

    Related research

    Keywords: foreign direct investment; captive offshoring; outward direct investment; vertical FDI; foreign affiliates; intra-firm trade; multinational corporations; MNCs; domestic employment; employment impacts; USA; United States; international outsourcing; national economies; economic impact; definitional problems; data limitations; immeasurable dimensions; foreign sales; parent companies; services sector; service industry; high-tech industries; manufacturing industries; high technology; job losses; unemployment; economics; business research; intra-industry trade.;

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    1. Gregory Mankiw, N. & Swagel, Phillip, 2006. "The politics and economics of offshore outsourcing," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 1027-1056, July.
    2. David L. Carr & James R. Markusen & Keith E. Maskus, 1998. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," NBER Working Papers 6773, National Bureau of Economic Research, Inc.
    3. Harrison, Ann E. & McMillan, Margaret S., 2006. "Dispelling Some Myths About Offshoring," MPRA Paper 15615, University Library of Munich, Germany.
    4. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
    5. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and Domestic Economic Activity," NBER Working Papers 11717, National Bureau of Economic Research, Inc.
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