WP 2009-5 Financialization and the Dynamics of Offshoring in the U.S
Analysis of 35 U.S. manufacturing and service industries over the period 1998-2006 supports aggregate and firm-level studies showing that off-shoring is associated with a higher share of corporate profit in total value added. But these “dynamic” gains from off-shoring have not been realized, because firms have purchased financial assets – especially share buybacks and higher dividend payments – to raise shareholder value, rather than investing in productive assets that raise productivity, growth, employment and income. Despite the corporate sector’s contribution to national savings over the past decade, the off-shoring-financialization linkage reduces the capacity of non-financial corporations to act as a driver of the recovery from the economic crisis that emerged in 2008.
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