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Gains from Offshoring? Evidence from U.S. Microdata

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  • Monarch, Ryan

    (University of Michigan)

  • Park, Jooyoun

    (Kent State University)

  • Sivadasan, Jagadeesh

    (University of Michigan)

Abstract

We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to micro-data from the U.S. Census Bureau. We exploit this data to assess how offshoring impacts domestic firm-level aggregate employment, output, wages and productivity. A class of models predicts that more productive firms engage in offshoring, and that this leads to gains in output and (measured) productivity, and potential gains in employment and wages, in the remaining domestic activities of the offshoring firm. Consistent with these models, we find that offshoring firms are on average larger and more productive compared to non-offshorers. However, we find that offshorers suffer from a large decline in employment (32 per cent) and output (28 per cent) relative to their peers even in the long run. Further, we find no signi cant change in average wages or in total factor productivity measures at affected firms. We find these results robust to a variety of checks. Thus we find no evidence for positive spillovers to the remaining domestic activity of firms in this large sample of offshoring events.

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File URL: http://www.fordschool.umich.edu/rsie/workingpapers/Papers626-650/r635.pdf
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Bibliographic Info

Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 635.

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Length: 51 pages
Date of creation: 21 Jan 2013
Date of revision:
Handle: RePEc:mie:wpaper:635

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Postal: ANN ARBOR MICHIGAN 48109
Web page: http://www.fordschool.umich.edu/rsie/
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Keywords: Outsourcing; employment; trade; productivity; firm performance;

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  1. Braconier, Henrik & Ekholm, Karolina, 1999. "Swedish Multinationals and Competition from High- and Low-Wage Locations," Working Paper Series 523, Research Institute of Industrial Economics.
  2. Feenstra, Robert C & Markusen, James R, 1994. "Accounting for Growth with New Inputs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 429-47, May.
  3. Jooyoun Park, 2012. "Does Occupational Training by the Trade Adjustment Assistance Program Really Help Reemployment? Success Measured as Occupation Matching," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 999-1016, November.
  4. Enghin Atalay & Ali Hortacsu & Chad Syverson, 2012. "Why Do Firms Own Production Chains?," NBER Working Papers 18020, National Bureau of Economic Research, Inc.
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  6. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2005. "Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods," NBER Working Papers 11404, National Bureau of Economic Research, Inc.
  7. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
  8. Kleinert, Jörn & Toubal, Farid, 2007. "Gravity for FDI," Tübinger Diskussionsbeiträge 313, University of Tübingen, School of Business and Economics.
  9. Robert E. Lipsey, 1994. "Outward Direct Investment and the U.S. Economy," NBER Working Papers 4691, National Bureau of Economic Research, Inc.
  10. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
  11. David Hummels & Rasmus Jørgensen & Jakob R. Munch & Chong Xiang, 2011. "The Wage Effects of Offshoring: Evidence from Danish Matched Worker-Firm Data," NBER Working Papers 17496, National Bureau of Economic Research, Inc.
  12. Teresa C. Fort, 2013. "Breaking Up Is Hard To Do: Why Firms Fragment Production Across Locations," Working Papers 13-35, Center for Economic Studies, U.S. Census Bureau.
  13. Jacob Funk Kirkegaard, 2007. "Offshoring, Outsourcing, and Production Relocation—Labor-Market Effects in the OECD Countries and Developing Asia," Working Paper Series WP07-2, Peterson Institute for International Economics.
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Cited by:
  1. Kondo, Illenin O., 2013. "Trade Reforms, Foreign Competition, and Labor Market Adjustments in the U.S," International Finance Discussion Papers 1095, Board of Governors of the Federal Reserve System (U.S.).

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