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 Program, International Finance and Macroeconomics Program, International Trade and Investment Program

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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