IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/14061.html
   My bibliography  Save this paper

Much Ado About Nothing: American Jobs and the Rise of Service Outsourcing to China and India

Author

Listed:
  • Runjuan Liu
  • Daniel Trefler

Abstract

We examine the impact on U.S. labor markets of offshore outsourcing in services to China and India. We also consider the reverse flow or 'inshoring' which is the sale of services produced in the United States to unaffiliated buyers in China and India. Using March-to-March matched CPS data for 1996-2006 we examine the impacts on (1) occupation and industry switching, (2) weeks spent unemployed as a share of weeks in the labor force, and (3) earnings. We precisely estimate small positive effects of inshoring and smaller negative effects of offshore outsourcing. The net effect is positive. To illustrate how small the effects are, suppose that over the next nine years all of inshoring and offshore outsourcing grew at rates experienced during 1996-2005 in business, professional and technical services i.e., in segments where China and India have been particularly strong. Then workers in occupations that are exposed to inshoring and offshore outsourcing (1) would switch 4-digit occupations 2 percent less often, (2) would spend 0.1 percent less time unemployed, and (3) would earn 1.5 percent more. These are not annual changes - they are changes over nine years - and are thus best described as small positive effects.

Suggested Citation

  • Runjuan Liu & Daniel Trefler, 2008. "Much Ado About Nothing: American Jobs and the Rise of Service Outsourcing to China and India," NBER Working Papers 14061, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14061
    Note: ITI LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w14061.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Tom Krebs & Pravin Krishna & William Maloney, 2010. "Trade Policy, Income Risk, and Welfare," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 467-481, August.
    2. Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 489-530.
    3. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Specificity Of Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 63-115, February.
    4. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    5. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-245, May.
    6. 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.
    7. Giuseppe Moscarini & Kaj Thomsson, 2007. "Occupational and Job Mobility in the US," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 807-836, December.
    8. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January.
    9. Pol Antras & Elhanan Helpman, 2004. "Global Sourcing," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 552-580, June.
    10. Noel Gaston & Daniel Trefler, 1997. "The Labour Market Consequences of the Canada-U.S. Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 18-41, February.
    11. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1992. "On the Labor Market Effects of Immigration and Trade," NBER Chapters, in: Immigration and the Work Force: Economic Consequences for the United States and Source Areas, pages 213-244, National Bureau of Economic Research, Inc.
    12. Ann E. Harrison & Margaret S. McMillan, 2006. "Outsourcing Jobs? Multinationals and US Employment," NBER Working Papers 12372, National Bureau of Economic Research, Inc.
    13. repec:hrv:faseco:4784029 is not listed on IDEAS
    14. repec:oup:ecpoli:v:20:y:2005:i:42:p:308-347 is not listed on IDEAS
    15. Jagdish Bhagwati & Arvind Panagariya, 2004. "The Muddles over Outsourcing," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 93-114, Fall.
    16. Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
    17. David Neumark & Daiji Kawaguchi, 2001. "Attrition Bias in Economic Relationships Estimated with Matched CPS Files," NBER Working Papers 8663, National Bureau of Economic Research, Inc.
    18. 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.
    19. Linda S. Goldberg & Joseph Tracy, 2001. "Exchange rates and wages," Staff Reports 116, Federal Reserve Bank of New York.
    20. Mary Amiti & Shang-Jin Wei, 2005. "Service Offshoring, Productivity, and Employment; Evidence from the United States," IMF Working Papers 2005/238, International Monetary Fund.
    21. Mary Amiti & Shang-Jin Wei, 2009. "Does Service Offshoring Lead to Job Losses? Evidence from the United States," NBER Chapters, in: International Trade in Services and Intangibles in the Era of Globalization, pages 227-243, National Bureau of Economic Research, Inc.
    22. repec:pri:cepsud:119blinder is not listed on IDEAS
    23. Bartel, Ann P & Lach, Saul & Sicherman, Nachum, 2005. "Outsourcing and Technological Change," CEPR Discussion Papers 5082, C.E.P.R. Discussion Papers.
    24. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1375-1418.
    25. Alan S. Blinder, 2005. "Fear of Offshoring," Working Papers 83, Princeton University, Department of Economics, Center for Economic Policy Studies..
    26. Catherine L. Mann, 2003. "Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth," Policy Briefs PB03-11, Peterson Institute for International Economics.
    27. 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.
    28. Paul R. Bergin & Robert C. Feenstra & Gordon H. Hanson, 2007. "Outsourcing and Volatility," NBER Working Papers 13144, National Bureau of Economic Research, Inc.
    29. Robert Z. Lawrence & Matthew J. Slaughter, 1993. "International Trade and American Wages in the 1980s: Giant Sucking Sound or Small Hiccup?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2 Microec), pages 161-226.
    30. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
    31. C. Alan Garner, 2004. "Offshoring in the service sector : economic impact and policy issues," Economic Review, Federal Reserve Bank of Kansas City, vol. 89(Q III), pages 5-37.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rosario Crinò, 2010. "Service Offshoring and White-Collar Employment," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 595-632.
    2. Rosario Crinò, 2010. "Service Offshoring and White-Collar Employment," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 595-632.
    3. Baldwin, John R. Gu, Wulong, 2008. "Outsourcing and Offshoring in Canada," Economic Analysis (EA) Research Paper Series 2008055e, Statistics Canada, Analytical Studies Branch.
    4. Baldwin, John R. Gu, Wulong, 2008. "Impartition et délocalisation au Canada," Série de documents de recherche sur l'analyse économique (AE) 2008055f, Statistics Canada, Direction des études analytiques.
    5. Rosario Crinò, 2009. "Offshoring, Multinationals And Labour Market: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(2), pages 197-249, April.
    6. Harrison, Ann E. & McMillan, Margaret S., 2006. "Dispelling Some Myths About Offshoring," MPRA Paper 15615, University Library of Munich, Germany.
    7. Liu, Runjuan & Trefler, Daniel, 2019. "A sorted tale of globalization: White collar jobs and the rise of service offshoring," Journal of International Economics, Elsevier, vol. 118(C), pages 105-122.
    8. Rosario Crino, 2006. "Are U.S. White-Collar Really at Risk of Service Offshoring?," KITeS Working Papers 183, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Oct 2006.
    9. Alexander Hijzen & Mauro Pisu & Richard Upward & Peter W. Wright, 2011. "Employment, job turnover, and trade in producer services: UK firm-level evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 44(3), pages 1020-1043, August.
    10. Ufuk Demiroglu, 2008. "Offshoring of Service Jobs," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 8(1), pages 17-63.
    11. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "The rise of offshoring: it's not wine for cloth anymore," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 59-102.
    12. Hartmut Egger & Udo Kreickemeier & Jens Wrona, 2017. "Offshoring Domestic Jobs," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 2, pages 27-70, World Scientific Publishing Co. Pte. Ltd..
    13. Mitra, Devashish & Ranjan, Priya, 2007. "Offshoring and Unemployment," IZA Discussion Papers 2805, Institute of Labor Economics (IZA).
    14. Jan Hogrefe & Jens Wrona, 2015. "Trade, tasks and training: The effect of offshoring on individual skill upgrading," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(4), pages 1537-1560, November.
    15. Tobias Brändle & Andreas Koch, 2017. "Offshoring and Outsourcing Potentials: Evidence from German Micro-Level Data," The World Economy, Wiley Blackwell, vol. 40(9), pages 1775-1806, September.
    16. 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.
    17. Charlie Karlsson & Gunther Maier & Michaela Trippl & Iulia Siedschlag & Gavin Murphy, 2010. "ICT and Regional Economic Dynamics: A Literature Review," JRC Working Papers JRC59920, Joint Research Centre (Seville site).
    18. Thomas Kemeny & David Rigby & Abigail Cooke, 2015. "Cheap Imports and the Loss of US Manufacturing Jobs," The World Economy, Wiley Blackwell, vol. 38(10), pages 1555-1573, October.
    19. Pol Antràs & Luis Garicano & Esteban Rossi-Hansberg, 2006. "Offshoring in a Knowledge Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 121(1), pages 31-77.
    20. Wilhelm Kohler & Jens Wrona, 2010. "Offshoring Tasks, yet Creating Jobs?," CESifo Working Paper Series 3019, CESifo.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14061. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.