Working Paper: CEPR ID: DP14485
Authors: Andrew B. Bernard; Teresa Fort; Valerie Smeets; Frederic Warzynski
Abstract: This paper exploits a unique offshoring survey to show that firms continue domestic production of the same goods they offshore to low-wage countries. This shift towards ``produced-good imports" coincides with a reallocation of labor from physical production to innovation and technology occupations, and an increase in domestically produced varieties' unit values. These responses suggest an additional, firm-level benefit of trade liberalization: the opportunity to offshore production of low-quality varieties, thereby freeing up resources for the development, production, and marketing of higher-quality varieties. Firms’ reactions also motivate a new offshoring measure – produced-good imports – that is readily observed in most firm-level datasets.
Keywords: offshoring; innovation; import competition; skilled workers; technology; R&D
JEL Codes: L25; F14; F61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Offshoring (F23) | Increase in imports of produced goods (F10) |
| Offshoring (F23) | Reallocation of resources (D61) |
| Offshoring (F23) | Increase in share of tech workers (J69) |
| Offshoring (F23) | Decrease in share of production workers (J29) |
| Offshoring (F23) | Increase in domestic production unit values (O49) |
| Increase in produced-good imports (F14) | Increase in share of tech workers (J69) |
| Increase in produced-good imports (F14) | Decrease in share of production workers (J29) |
| Offshoring (F23) | Increase in innovative capabilities (O36) |
| Offshoring (F23) | Higher-quality products (L15) |