The Labor Market Effects of Offshoring by U.S. Multinational Firms

NBER Working Paper No. 23947

Issued in October 2017, Revised in October 2019

NBER Program(s):International Trade and Investment, Labor Studies



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.

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Document Object Identifier (DOI): 10.3386/w23947

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