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Gains from Offshoring? Evidence from U.S. Microdata

Ryan Monarch, Jooyoun Park () and Jagadeesh Sivadasan

No 1124, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: 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.

Keywords: Outsourcing; manufacturing; employment; trade; productivity; firm performance (search for similar items in EconPapers)
JEL-codes: F14 F16 F23 F61 F66 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2014-11-11
New Economics Papers: this item is included in nep-bec, nep-eff, nep-int and nep-sbm
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Related works:
Working Paper: Gains from Offshoring? Evidence from U.S. Microdata (2013) Downloads
Working Paper: Gains from Offshoring? Evidence from U.S. Microdata (2013) Downloads
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