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Multinationals, Offshoring, and the Decline of U.S. Manufacturing

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  • Boehm, Christoph E.
  • Flaaen, Aaron
  • Pandalai-Nayar, Nitya

Abstract

We provide new facts about the role of multinationals in the decline in U.S. manufacturing employment between 1993 and 2011, using a novel microdata panel with firm-level ownership and trade information. Multinational-owned establishments displayed lower employment growth than a narrow control group and accounted for 41% of the aggregate decline. Newly multinational establishments experienced job losses, while their parent firms increased foreign input imports. We develop a model that rationalizes this behavior and bound a key elasticity with our microdata. The estimates imply that multinational offshoring was responsible for a sizable reduction in U.S. manufacturing employment.

Suggested Citation

  • Boehm, Christoph E. & Flaaen, Aaron & Pandalai-Nayar, Nitya, 2020. "Multinationals, Offshoring, and the Decline of U.S. Manufacturing," Journal of International Economics, Elsevier, vol. 127(C).
  • Handle: RePEc:eee:inecon:v:127:y:2020:i:c:s0022199620301069
    DOI: 10.1016/j.jinteco.2020.103391
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    2. Gumpert, Anna & Li, Haishi & Moxnes, Andreas & Ramondo, Natalia & Tintelnot, Felix, 2020. "The life-cycle dynamics of exporters and multinational firms," Journal of International Economics, Elsevier, vol. 126(C).
    3. Akcigit, Ufuk & Ates, Sina T., 2019. "What Happened to U.S. Business Dynamism?," CEPR Discussion Papers 13669, C.E.P.R. Discussion Papers.
    4. Ufuk Akcigit & Sina T. Ates, 2019. "Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory," NBER Working Papers 25755, National Bureau of Economic Research, Inc.
    5. Campbell, Douglas L., 2020. "Relative Prices and Hysteresis: Evidence from US Manufacturing," European Economic Review, Elsevier, vol. 129(C).
    6. Nicolas Vincent & Matthias Kehrig, 2017. "Growing Productivity without Growing Wages: The Micro-Level Anatomy of the Aggregate Labor Share Decline," 2017 Meeting Papers 739, Society for Economic Dynamics.
    7. Davide Furceri & Prakash Loungani & Jonathan D. Ostry, 2019. "The Aggregate and Distributional Effects of Financial Globalization: Evidence from Macro and Sectoral Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(S1), pages 163-198, December.
    8. Blaum, Joaquin & Lelarge, Claire & Peters, Michael, 2019. "Firm size, quality bias and import demand," Journal of International Economics, Elsevier, vol. 120(C), pages 59-83.
    9. Douglas L. Campbell & Karsten Mau, 2019. "Trade Induced Technological Change: Did Chinese Competition Increase Innovation in Europe?," Working Papers w0252, New Economic School (NES).
    10. Ufuk Akcigit & Sina T. Ates, 2019. "What Happened to U.S. Business Dynamism?," CESifo Working Paper Series 7854, CESifo.
    11. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    12. Alessandro Bellocchi & Giovanni Marin & Giuseppe Travaglini, 2021. "The Great Fall of Labor Share:Micro Determinants for EU Countries Over 2011-2019," Working Papers 2102, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2021.
    13. Adam Hal Spencer, 2020. "Policy effects of international taxation on firm dynamics and capital structure," Discussion Papers 2020-25, University of Nottingham, GEP.
    14. Ufuk Akcigit & Sina T. Ates, 2019. "Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory," CESifo Working Paper Series 7849, CESifo.
    15. Peter Schott & Justin Pierce & Georg Schaur & Sebastian Heise, 2017. "Trade Policy Uncertainty and the Structure of Supply Chains," 2017 Meeting Papers 788, Society for Economic Dynamics.

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    More about this item

    Keywords

    Multinational firms; Offshoring; Outsourcing; Manufacturing employment;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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