Critics of globalization claim that firms are being driven to shift employment abroad by the prospects of cheaper labor. Yet the evidence for this, beyond anecdotes, is slim. In this article, we review evidence on whether firms that do business in foreign countries are substituting foreign for domestic labor. We review the results of previous studies and present new firm-level evidence showing that, in fact, increases in employment in low-income countries do hurt employment at home. The premise that foreign expansion of U.S. multinationals encourages employment at home is a myth, but the domestic employment costs of offshoring are probably fairly small in magnitude.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
15615.
Length: Date of creation: 2006 Date of revision: Publication status: Published in Academy of Management Perspectives 4.20(2006): pp. 6-22 Handle: RePEc:pra:mprapa:15615
Find related papers by JEL classification: J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business M55 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Contracting Devices
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