NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Multinationals, Offshoring and the Decline of U.S. Manufacturing

Christoph E. Boehm, Aaron Flaaen, Nitya Pandalai-Nayar

NBER Working Paper No. 25824
Issued in May 2019
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, International Trade and Investment

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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Document Object Identifier (DOI): 10.3386/w25824

 
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