Much Ado About Nothing: American Jobs and the Rise of Service Outsourcing to China and India

64 Pages Posted: 9 Jun 2008 Last revised: 4 Jun 2022

See all articles by Runjuan Liu

Runjuan Liu

Alberta School of Business, University of Alberta

Daniel Trefler

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Date Written: June 2008

Abstract

We examine the impact on U.S. labor markets of offshore outsourcing in services to China and India. We also consider the reverse flow or 'inshoring' which is the sale of services produced in the United States to unaffiliated buyers in China and India. Using March-to-March matched CPS data for 1996-2006 we examine the impacts on (1) occupation and industry switching, (2) weeks spent unemployed as a share of weeks in the labor force, and (3) earnings. We precisely estimate small positive effects of inshoring and smaller negative effects of offshore outsourcing. The net effect is positive. To illustrate how small the effects are, suppose that over the next nine years all of inshoring and offshore outsourcing grew at rates experienced during 1996-2005 in business, professional and technical services i.e., in segments where China and India have been particularly strong. Then workers in occupations that are exposed to inshoring and offshore outsourcing (1) would switch 4-digit occupations 2 percent less often, (2) would spend 0.1 percent less time unemployed, and (3) would earn 1.5 percent more. These are not annual changes - they are changes over nine years - and are thus best described as small positive effects.

Suggested Citation

Liu, Runjuan and Trefler, Daniel, Much Ado About Nothing: American Jobs and the Rise of Service Outsourcing to China and India (June 2008). NBER Working Paper No. w14061, Available at SSRN: https://ssrn.com/abstract=1142233

Runjuan Liu

Alberta School of Business, University of Alberta ( email )

Edmonton, Alberta T6G 2R6
Canada
7804920334 (Phone)
7804923325 (Fax)

HOME PAGE: http://apps.ualberta.ca/directory/person/runjuan

Daniel Trefler (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-4190 (Phone)
416-978-6713 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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