The Effects of Offshoring on Post-displacement Wages: Evidence from the United States

Abstract

This paper studies the effects of offshoring on post‐displacement wages using a large and nationally representative sample of US workers displaced from a manufacturing industry during the 1990s. The empirical results based on Mincerian regressions of individual re‐employment earnings on industry‐level offshoring proxies, show that the effects of offshoring on post‐displacement wages are negative, although not economically large. The preferred specifications suggest, in fact, that a one percentage point increase in offshoring in the pre‐displacement industry reduces earnings on the new job by approximately 0.3–0.6 per cent. These figures imply that the cumulative rise in offshoring over the sample period may have led to a drop of between US$110 and US$330 in the yearly re‐employment wages of US displaced workers. While the magnitude of the effect is largely independent of individual characteristics such as gender, age, occupation and educational level, it does depend on the duration of non‐employment and on workers’ industrial reallocation after displacement. In particular, the effects are relatively stronger for individuals who stay longer before finding a new job, as well as for those who leave the pre‐displacement industry after the job loss.

Global Value Chains and Wages: Multi-Country Evidence from Linked Worker-Industry Data

“…Increasing cross-country industrial interdependence due to offshoring and production networks has even been dubbed Bthe next industrial revolution^ (Blinder 2006), while today's geographically dispersed production and trade can be described as a BFactory World^ (Los et al 2015a). Unsurprisingly, labour market research has focused on potential crossborder job substitution and the employment outcomes of production sharing (Acemoglu et al 2016;Harrison and McMillan 2011;Michel and Rycx 2012) or the impact of production fragmentation on earnings and wages (Baumgarten et al 2013;Crinò 2010;Ebenstein et al 2014;Geishecker and Görg 2013;Geishecker et al 2010, Hummels et al 2014Parteka and Wolszczak-Derlacz 2015;Wolszczak-Derlacz and Parteka 2018). 3 This paper ties most directly into the latter aspect: the influence of cross-border production sharing and the resulting production links on domestic workers' wages.…”

Offshoring and the Skill‐premium: Evidence from Individual Workers’ Data

“…Related papers are Lovely and Richardson (), Kosteas () and Crinò (). Lovely and Richardson () and Kosteas () use, respectively, the Panel Study of Income Dynamics and the National Longitudinal Survey of Youth to study the effect of international trade and offshoring on wages.…”

“…Moreover, some of the recorded changes in education may be due to coding errors . Crinò () uses longitudinal data on a sample of displaced US workers to assess the impact of offshoring in manufacturing on postdisplacement wages, for the 1994–2002 period. He finds that workers who move out of manufacturing because of an offshoring shock incur significant wage losses.…”

Offshoring and Outsourcing Potentials: Evidence from German Micro‐Level Data

“… See Mankiw and Swagel (), Crinò () and Wagner () for recent overviews, and Geishecker (), Crinò (), Baumgarten () and Karpaty and Tingvall () for evidence on the effects of offshoring. More recently, services offshoring and its consequences have gained more attention in the literature; see, for example, Winkler () and Eppinger (). …”