Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
Gains from Offshoring? Evidence from U.S. Microdata
We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to confidential data on U.S. firm operations. We exploit these data to assess how offshoring affects domestic firm-level aggregate employment, output, wages and productivity. Consistent with heterogenous firm models where offshoring involves a fixed cost, we find that the average offshoring firm is larger and more productive than the average non-offshorer. After initiating offshoring, firms experience large declines in employment (46.2 per cent), output (38.5 per cent) and capital (28.8 per cent) relative to their industry peers. We find no significant change in average wages or in total factor productivity measures for offshoring firms. These results are consistent across two separate difference-in-differences (DID) approaches, an instrumental variables approach, and a number of robustness checks. Thus, we find offshoring to be a strong substitute for domestic activity in this large sample of offshoring events.
Cite this item
Ryan Monarch & Jooyoun Park & Jagadeesh Sivadasan, Gains from Offshoring? Evidence from U.S. Microdata, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1124, 11 Nov 2014.
- 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
- F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
- F66 - International Economics - - Economic Impacts of Globalization - - - Labor
Keywords: Outsourcing; manufacturing; employment; trade; productivity; firm performance
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