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A Structural Estimation of the Employment Effects of Offshoring in the U.S. Labor Market

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Listed:
  • Wei, Xuan
  • Meng, Xianwei
  • Thornsbury, Suzanne

Abstract

In this paper, we generalize the Grossman and Rossi-Hansberg (2008) offshoring model to include numerous tasks/skill levels and then empirically investigate the effect of offshoirng on occupational employment for ten major occupational groups (at 2-digit SOC level) in the U.S. labor market using the CPSMORG (Current Population Survey Merged Outgoing Rotation Groups) data from year 1983 to 2011. We first use the non-parametric monotonic cubic spline interpolation method to approximate offshoring cost functions. Results show that among the ten occupational groups, those involved with more impersonal and/or routine tasks have relatively lower offshoring costs in comparison to groups involved in more personal and/or non-routine manual tasks. Based on estimated offshoring costs, we then focus our analysis on five relatively more offshorable occupational groups to further calculate the number of jobs offshored as well as the offshoring percentage by occupation over the sample period. Results indicate: i) production occupations are most offshorable among all five offshorable occupational groups; ii) the offshoring percentage for production occupations has been increasing over time; and iii) offshoring percentages for professional occupations, management, business, and financial operations occupations have been decreasing over time.

Suggested Citation

  • Wei, Xuan & Meng, Xianwei & Thornsbury, Suzanne, 2013. "A Structural Estimation of the Employment Effects of Offshoring in the U.S. Labor Market," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151278, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:151278
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    File URL: http://purl.umn.edu/151278
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    References listed on IDEAS

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    1. Crinò, Rosario, 2010. "Employment effects of service offshoring: Evidence from matched firms," Economics Letters, Elsevier, vol. 107(2), pages 253-256, May.
    2. Chiara Criscuolo & Luis Garicano, 2010. "Offshoring and Wage Inequality: Using Occupational Licensing as a Shifter of Offshoring Costs," American Economic Review, American Economic Association, vol. 100(2), pages 439-443, May.
    3. Alan S. Blinder & Alan B. Krueger, 2013. "Alternative Measures of Offshorability: A Survey Approach," Journal of Labor Economics, University of Chicago Press, vol. 31(S1), pages 97-128.
    4. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    5. Avraham Ebenstein & Ann Harrison & Margaret McMillan & Shannon Phillips, 2014. "Estimating the Impact of Trade and Offshoring on American Workers using the Current Population Surveys," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 581-595, October.
    6. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    7. Bardhan, Ashok Deo & Kroll, Cynthia, 2003. "The New Wave of Outsourcing," Fisher Center for Real Estate & Urban Economics, Research Reports qt02f8z392, Fisher Center for Real Estate & Urban Economics, UC Berkeley.
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    More about this item

    Keywords

    Offshoring; Employment; Monotonic Cubic Spline Interpolation; Offshoring Cost; Labor and Human Capital; F14; F16; C14;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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