Working Paper: NBER ID: w25824
Authors: Christoph E. Boehm; Aaron Flaaen; Nitya Pandalai Nayar
Abstract: 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.
Keywords: Multinationals; Offshoring; Manufacturing Employment; Foreign Sourcing
JEL Codes: F14; F16; F23; F4; F6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| multinational ownership (F23) | lower employment growth (J69) |
| multinational establishments (F23) | job losses (J63) |
| offshoring by multinationals (F23) | aggregate manufacturing employment decline (L79) |
| foreign sourcing (F23) | domestic employment (J63) |
| foreign sourcing (F23) | imports of intermediates (F14) |
| increased imports (F10) | decreased domestic employment (F66) |