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

J.K. Mullen and Martin Williams

International Journal of Economics and Business Research, 2012, vol. 4, issue 1/2, 21-34

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.

Keywords: foreign direct investment; captive offshoring; outward direct investment; vertical FDI; foreign affiliates; intra-firm trade; multinational corporations; MNCs; domestic employment; employment impacts; USA; United States; international outsourcing; national economies; economic impact; definitional problems; data limitations; immeasurable dimensions; foreign sales; parent companies; services sector; service industry; high-tech industries; manufacturing industries; high technology; job losses; unemployment; economics; business research; intra-industry trade. (search for similar items in EconPapers)
Date: 2012
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