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

83 Pages Posted: 15 May 2019

See all articles by Christoph Boehm

Christoph Boehm

University of Texas at Austin

Aaron Flaaen

Board of Governors of the Federal Reserve System

Nitya Pandalai-Nayar

University of Texas at Austin - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: May 2019

Abstract

We provide new facts about the role of multinationals in the decline in U.S. manufacturing employment between 1993-2011, using a novel microdata panel with firm-level ownership and trade information. Multinational-owned establishments displayed lower employment growth than a narrow control group and accounted for 41% of the aggregate manufacturing employment decline. Further, newly multinational establishments in the U.S. experienced job losses, while their parent firms increased input imports from abroad. We develop a model that rationalizes this behavior and bound a key elasticity with our microdata. The estimates imply that a reduction in the costs of foreign sourcing leads firms to increase imports of intermediates and to reduce U.S. manufacturing employment. Our findings suggest that offshoring by multinationals was a key driver of the observed decline in manufacturing employment.

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Suggested Citation

Boehm, Christoph and Flaaen, Aaron and Pandalai-Nayar, Nitya, Multinationals, Offshoring and the Decline of U.S. Manufacturing (May 2019). NBER Working Paper No. w25824, Available at SSRN: https://ssrn.com/abstract=3388440

Christoph Boehm (Contact Author)

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Aaron Flaaen

Board of Governors of the Federal Reserve System ( email )

20th and Constitution Ave., NW
Washington, DC 20551
United States
202-973-7338 (Phone)

HOME PAGE: http://www.federalreserve.gov/econresdata/aaron-b-flaaen.htm

Nitya Pandalai-Nayar

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

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