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Captive offshoring by US multinationals: measuring the domestic employment impacts of vertical FDI

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  • J.K. Mullen
  • Martin Williams

Abstract

The complex nature of ‘international outsourcing’ makes it difficult to quantify its employment and broader impacts on national economies. Indeed, available evidence on the extent of ‘offshoring’ by US firms is scant, rendering analyses of its economic impacts as largely unreliable. Attempts to gauge its domestic employment effects have been limited both by definitional problems and data limitations, even when the immeasurable dimensions of offshoring are ignored. This work offers a quantitative assessment of the importance of ‘captive offshoring’ in relation to the entire US economy. Using government data that report foreign affiliate sales back to US parents, we provide ‘back of the envelope’ estimates of the domestic employment effects of vertically motivated foreign direct investment. Although this trend has accelerated most rapidly within the services sector, the findings suggest that ‘high-tech’ manufacturing industries are a major and growing source of job loss.

Suggested Citation

  • J.K. Mullen & Martin Williams, 2012. "Captive offshoring by US multinationals: measuring the domestic employment impacts of vertical FDI," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(1/2), pages 21-34.
  • Handle: RePEc:ids:ijecbr:v:4:y:2012:i:1/2:p:21-34
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    References listed on IDEAS

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    1. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June.
    2. Gregory Mankiw, N. & Swagel, Phillip, 2006. "The politics and economics of offshore outsourcing," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 1027-1056, July.
    3. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
    4. Harrison, Ann E. & McMillan, Margaret S., 2006. "Dispelling Some Myths About Offshoring," MPRA Paper 15615, University Library of Munich, Germany.
    5. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and Domestic Economic Activity," NBER Working Papers 11717, National Bureau of Economic Research, Inc.
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