TY  - JOUR
AU  - Harrison,Ann E.
AU  - McMillan,Margaret S.
TI  - Outsourcing Jobs? Multinationals and US Employment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12372
PY  - 2006
Y2  - July 2006
UR  - http://www.nber.org/papers/w12372
L1  - http://www.nber.org/papers/w12372.pdf
N1  - Author contact info:
Ann Harrison
The Wharton School
University of Pennsylvania
2016 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6370
Tel: 215 746 3132
E-Mail: annh@wharton.upenn.edu

Margaret S. McMillan
Tufts University
Department of Economics
114a Braker Hall
Medford, MA 02155
Tel: 617/627-3137
Fax: 617/627-3197
E-Mail: margaret.mcmillan@tufts.edu
M2  - featured in NBER digest on 2006-07-24
AB  - Critics of globalization claim that US manufacturing firms are being driven to shift employment abroad by the prospects of cheaper labor. Others argue that the availability of low-wage labor has allowed US based firms to survive and even prosper. Yet evidence for either hypothesis, beyond anecdotes, is slim. Using firm-level data collected by the US Bureau of Economic Analysis (BEA), we estimate the impact on US manufacturing employment of changes in foreign affiliate wages, controlling for changing demand conditions and technological change. We find that the evidence supports both perspectives on globalization. For firms most likely to perform the same tasks in foreign affiliates and at home ("horizontal" foreign investment), foreign and domestic employees appear to be substitutes. For these firms, lower wages in affiliate locations are associated with lower employment in the US. However, for firms which do significantly different tasks at home and abroad ("vertical" foreign investment), foreign and domestic employment are complements. For vertical foreign investment, lower wages abroad are associated with higher US manufacturing employment. These offsetting effects may be combined to show that offshoring is associated with a quantitatively small decline in manufacturing employment. Other factors, such as declining prices for consumer goods, import competition, and falling prices for investment goods (which substitute for labor) play a more important role.
ER  -