Offshoring and Labor Markets

98 Pages Posted: 7 Mar 2016

See all articles by David L. Hummels

David L. Hummels

Purdue University - Department of Economics; National Bureau of Economic Research (NBER)

Jakob Roland Munch

University of Copenhagen - Department of Economics; Center for Economic and Business Research (CEBR)

Chong Xiang

Purdue University - Krannert School of Management

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Abstract

In this paper we survey the recent empirical literature on the effects of offshoring on wage, employment and displacement. We start with an overview of the measurement of offshoring, organizing our discussion around the three key elements of offshoring: that it involves intermediate inputs for production (vs. final goods for consumption); that it involves imported inputs (vs. domestically produced ones); and that the inputs involved could have been produced internally within the same firm. We then briefly discuss the theories of offshoring, and survey the literature that examines the wage effects of offshoring: the wave of studies using industry-level data; the wave using firm-level data; the wave using worker-level data; and the wave using matched worker-firm data. For each wave we highlight the identification strategies used, critically assess its strength and weakness, discuss its connections with theory, and draw out potential policy implications of its findings. Finally we survey the literature that examines how offshoring affects employment and displacement. We highlight the recent development of a novel cohort-based approach that is specifically designed to address selection with displacement, and capable of identifying the overall effects of offshoring, including wage, displacement, and all other types of transition.

Keywords: offshoring, wages, unemployment

JEL Classification: F1, J2, J3, L2

Suggested Citation

Hummels, David L. and Munch, Jakob Roland and Xiang, Chong, Offshoring and Labor Markets. IZA Discussion Paper No. 9741, Available at SSRN: https://ssrn.com/abstract=2742529

David L. Hummels (Contact Author)

Purdue University - Department of Economics ( email )

West Lafayette, IN 47907-1310
United States

National Bureau of Economic Research (NBER)

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Jakob Roland Munch

University of Copenhagen - Department of Economics ( email )

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Center for Economic and Business Research (CEBR)

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Chong Xiang

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

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