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Globalization and the U.S. Economy: An Analysis of Outsourcing and Labor Market Restructuring

Author

Listed:
  • Shankar Ghimire

    (Western Illinois University)

  • Rebecca Tomasik

    (Marshall University)

Abstract

This paper analyzes globalization and its impact on the United States economy. In particular, it focuses on the impact of increased outsourcing from the US on the share of skilled employed workers, a highly debated issue since the Great Recession. The issue is examined for the period 1992 - 2008 using the Vector Error Correction Model. The impulse response functions show a positive relationship between outsourcing and the share of skilled workers in the United States. This suggests that outsourcing leads to a higher proportion of jobs going to educated workers in the United States. The variance decompositions, however, suggest the majority of the change in the share of employed skilled workers is due to the supply side changes, namely an increase in the educated labor force, and not because of outsourcing. The findings are important from the policy perspective as the Trump administration adopts new trade and immigration policy regulations.

Suggested Citation

  • Shankar Ghimire & Rebecca Tomasik, 2019. "Globalization and the U.S. Economy: An Analysis of Outsourcing and Labor Market Restructuring," Journal of Economic Insight, Missouri Valley Economic Association, vol. 45(2), pages 69-88.
    • Handle: RePEc:mve:journl:v:45:y:2019:i:2:p:69-88
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    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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