Gains from Offshoring? Evidence from U.S. Microdata

63 Pages Posted: 31 May 2017

See all articles by Ryan Monarch

Ryan Monarch

Federal Reserve Board

Jooyoun Park

Kent State University

Jagadeesh Sivadasan

University of Michigan, Stephen M. Ross School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: 2014-11-11

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

JEL Classification: F14, F16, F23, F61, F66

Suggested Citation

Monarch, Ryan and Park, Jooyoun and Sivadasan, Jagadeesh, Gains from Offshoring? Evidence from U.S. Microdata (2014-11-11). FRB International Finance Discussion Paper No. 1124. Available at SSRN: https://ssrn.com/abstract=2976818

Ryan Monarch (Contact Author)

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jooyoun Park

Kent State University ( email )

Department of Economics
College of Business
Kent, OH 44242
United States
(330) 672 - 1086 (Phone)

HOME PAGE: http://www.personal.kent.edu/~jpark8/index.htm

Jagadeesh Sivadasan

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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