Working Paper: NBER ID: w23947
Authors: Brian K. Kovak; Lindsay Oldenski; Nicholas Sly
Abstract: We use firm-level data on U.S. multinationals to show how offshoring affects domestic employment within and across firms. We introduce a new instrument for offshoring: Bilateral Tax Treaties, which reduce the cost of offshore activities. We find substantial heterogeneity in effects. A 10 percent increase in affiliate employment drives a 1.3 percent increase in employment at the U.S. parent firm, with smaller effects at the industry and regional levels. In contrast, offshoring by vertical multinationals drives declining employment among non-multinationals in the same industry, and firms opening new affiliates exhibit smaller domestic employment growth than those expanding existing affiliates.
Keywords: offshoring; employment; bilateral tax treaties; multinational firms
JEL Codes: F16; F23; F66; J20; J30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bilateral tax treaties (BTTs) (F38) | effective tax rate reduction for US multinational firms (F23) |
| effective tax rate reduction for US multinational firms (F23) | costs associated with offshore activities (F23) |
| foreign affiliate employment (F29) | domestic employment at US parent firm (F23) |
| new offshore establishments (F23) | smaller domestic employment growth (J69) |
| offshoring by vertically oriented multinationals (F23) | declining employment among non-multinational firms in the same industry (F23) |
| offshoring (F23) | net employment by US firms (F23) |
| offshoring (F23) | job loss and employment reallocation (J63) |