Working Paper: NBER ID: w14061
Authors: Runjuan Liu; Daniel Trefler
Abstract: We examine the impact on U.S. labor markets of offshore outsourcing in services to China and India. We also consider the reverse flow or 'inshoring' which is the sale of services produced in the United States to unaffiliated buyers in China and India. Using March-to-March matched CPS data for 1996-2006 we examine the impacts on (1) occupation and industry switching, (2) weeks spent unemployed as a share of weeks in the labor force, and (3) earnings. We precisely estimate small positive effects of inshoring and smaller negative effects of offshore outsourcing. The net effect is positive. \n\nTo illustrate how small the effects are, suppose that over the next nine years all of inshoring and offshore outsourcing grew at rates experienced during 1996-2005 in business, professional and technical services i.e., in segments where China and India have been particularly strong. Then workers in occupations that are exposed to inshoring and offshore outsourcing (1) would switch 4-digit occupations 2 percent less often, (2) would spend 0.1 percent less time unemployed, and (3) would earn 1.5 percent more. These are not annual changes - they are changes over nine years - and are thus best described as small positive effects.
Keywords: offshore outsourcing; inshoring; labor markets; US jobs
JEL Codes: F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Offshore outsourcing (L24) | Industry switching (L69) |
| Offshore outsourcing (L24) | Occupation switching (J62) |
| Offshore outsourcing (L24) | Weeks spent unemployed (J64) |
| Offshore outsourcing (L24) | Earnings (J31) |
| Inshoring (O36) | Industry switching (L69) |
| Inshoring (O36) | Weeks spent unemployed (J64) |
| Inshoring (O36) | Earnings (J31) |