Working Paper: NBER ID: w26854
Authors: Andrew B. Bernard; Teresa C. 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 domestic 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; Globalization; Domestic production; Employment; Innovation
JEL Codes: F14; F16; F23; F61; L23; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Offshoring (F23) | Reduction in total employment at firms (J63) |
| Offshoring (F23) | Increase in domestic production (O49) |
| Increase in share of produced-good imports (F14) | Increase in share of tech workers (J69) |
| Increase in share of produced-good imports (F14) | Decline in share of production workers (J29) |
| Offshoring (F23) | Rise in domestic production unit values (O49) |