Foreign Sourcing of Intermediate Inputs: Impacts on Unskilled Labor in US Manufacturing Industries

John K Mullen () and James Panning ()
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John K Mullen: Economics & Finance, Box 5785, CUSB, Clarkson University, Potsdam, NY 13699, USA.
James Panning: The Hartford Insurance Group

Eastern Economic Journal, 2009, vol. 35, issue 2, 160-173

Abstract: A popular view maintains that unskilled workers have suffered from an increase in foreign sourcing of production activities by US manufacturing firms. While not a refutation, researchers have been keen to identify technology investment as playing a pivotal role in the deterioration of labor market outcomes for unskilled labor. Yet existing evidence is ambiguous concerning the wage/employment impacts of the US manufacturing sector's increased reliance on imported intermediates. Indeed, the few existing studies use earlier data that generally ignore the more recent upswing in the “offshoring” phenomenon. The present research utilizes data for six-digit (NAICS) manufacturing industries from 1997 to 2002. Cost-share equations generate a regression model to explain variations in the employment and wage-bill shares of skilled vs unskilled workers within these industries. Our findings imply that foreign sourcing of intermediates may be as important as technology spending in the skill upgrading of the manufacturing labor force. Eastern Economic Journal (2009) 35, 160–173. doi:10.1057/eej.2008.9

Date: 2009
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