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Why are American Workers getting Poorer? Estimating the Impact of Trade and Offshoring Using the CPS

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  • Avraham Ebenstein
  • Ann Harrison
  • Margaret McMillan
  • Shannon Phillips

Abstract

Previous studies typically find small or insignificant effects of globalization on US workers. We argue that much of the impact on wages has been missed because globalization has led workers to move from higher paid manufacturing jobs to lower paid service jobs. To show this, we link industry-level data on trade and offshoring with individual-level worker data from the Current Population Surveys. Previous research focused on industry-level exposure to globalization, which we show has no significant impact on worker wages. Our new measure of occupational exposure to globalization shows significant effects of globalization on wages. Offshoring to low wage countries is associated with wage declines for US workers, and the workers most affected are those performing routine tasks. Import competition is associated with wage declines, while exports are associated with wage increases. We present evidence that globalization has led to the reallocation of workers away from higher wage manufacturing jobs into other sectors and other occupations. We estimate that occupation switching due to trade led to real wage losses of 12 to 17 percent.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15107.

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Date of creation: Jun 2009
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Handle: RePEc:nbr:nberwo:15107

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  1. Robert C. Feenstra, 2000. "The Impact of International Trade on Wages," NBER Books, National Bureau of Economic Research, Inc, number feen00-1, October.
  2. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  3. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  4. Mary E. Lovely & J. David Richardson, 2000. "Trade Flows and Wage Premiums: Does Who or What Matter?," NBER Chapters, in: The Impact of International Trade on Wages, pages 309-348 National Bureau of Economic Research, Inc.
  5. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  6. N. Gregory Mankiw & Phillip Swagel, 2006. "The Politics and Economics of Offshore Outsourcing," NBER Working Papers 12398, National Bureau of Economic Research, Inc.
  7. Robert Z. Lawrence, 2008. "Blue-Collar Blues: Is Trade to Blame for Rising US Income Inequality?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa85, 1st quart.
  8. James Harrigan, 1998. "International trade and American wages in general equilibrium, 1967-1995," Staff Reports 46, Federal Reserve Bank of New York.
  9. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
  10. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-97, December.
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