Offshoring and Inflation

92 Pages Posted: 19 Oct 2020 Last revised: 18 Nov 2021

See all articles by Diego Comin

Diego Comin

Dartmouth College

Robert C. Johnson

University of Notre Dame - Department of Economics

Date Written: October 2020

Abstract

Did trade integration suppress inflation in the United States? Conventional wisdom says “yes,” based on the disinflationary supply-side impacts of trade. We argue that these supply-side arguments are incomplete, because trade integration also influences aggregate demand. Our analysis leverages two facts: trade integration was a long-lasting, phased-in shock, and offshoring accounts for a large share of it. Given these facts, we show trade integration is inflationary in conventional New Keynesian models. This result continues to hold when we account for US trade deficits, the pro-competitive effects of trade on domestic markups, and cross-sector heterogeneity in trade integration.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Comin, Diego and Johnson, Robert C., Offshoring and Inflation (October 2020). NBER Working Paper No. w27957, Available at SSRN: https://ssrn.com/abstract=3714449 or http://dx.doi.org/10.2139/ssrn.3714449

Diego Comin (Contact Author)

Dartmouth College ( email )

Department of Sociology
Hanover, NH 03755
United States

Robert C. Johnson

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
5
Abstract Views
113
PlumX Metrics