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Dispelling Some Myths About Offshoring

Ann Harrison () and Margaret McMillan ()

MPRA Paper from University Library of Munich, Germany

Abstract: Critics of globalization claim that firms are being driven to shift employment abroad by the prospects of cheaper labor. Yet the evidence for this, beyond anecdotes, is slim. In this article, we review evidence on whether firms that do business in foreign countries are substituting foreign for domestic labor. We review the results of previous studies and present new firm-level evidence showing that, in fact, increases in employment in low-income countries do hurt employment at home. The premise that foreign expansion of U.S. multinationals encourages employment at home is a myth, but the domestic employment costs of offshoring are probably fairly small in magnitude.

Keywords: Outsourcing; globalization; foreign labor; domestic labor; multinationals (search for similar items in EconPapers)
JEL-codes: F23 J08 M55 (search for similar items in EconPapers)
Date: 2006
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Published in Academy of Management Perspectives 4.20(2006): pp. 6-22

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