Multinationals, Offshoring and the Decline of U.S. Manufacturing

Nitya Pandalai-Nayar, Aaron Flaaen and Christoph Boehm

No 584, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: We provide three new stylized facts that characterize the role of multinationals in the U.S. manufacturing employment decline, using a novel microdata panel from 1993-2011 that augments U.S. Census data with firm ownership information and transaction-level trade. First, over this period, U.S. multinationals accounted for 41% of the aggregate manufacturing decline, disproportionate to their employment share in the sector. Second, U.S. multinational-owned establishments had lower employment growth rates than a narrowly-defined control group. Third, establishments that became part of a multinational experienced job losses, accompanied by increased foreign sourcing of intermediates by the parent firm. To establish whether imported intermediates are substitutes or complements for U.S. employment, we develop a model of input sourcing and show that the employment impact of foreign sourcing depends on a key elasticity -- of firm size to production efficiency. Structural estimation of this elasticity finds that imported intermediates substitute for U.S. employment. In general equilibrium, our estimates imply a sizable manufacturing employment decline of 13%.

Date: 2016
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Related works:
Journal Article: Multinationals, Offshoring, and the Decline of U.S. Manufacturing (2020)
Working Paper: Multinationals, Offshoring and the Decline of U.S. Manufacturing (2019)
Working Paper: Multinationals Offshoring, and the Decline of U.S. Manufacturing (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:584

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