oart2121, 09:20 ‘THE EFFECTS OF OFFSHORING ON DOMESTIC WORKERS: THE EFFECTS OF OFFSHORING ON DOMESTIC WORKERS: A REVIEW OF THE LITERATURE Andre Barbe David Riker ECONOMICS WORKING PAPER SERIES. Working Paper 2017-10-A U.S, INTERNATIONAL TRADE COMMISSION 500 E Street SW Washington, DC 20436 October 2017 Office of Economics working papers are the result of ongoing professional research of USITC Sta and are solely meant to apresent the opinions and provessional cesoarch of indvidual authors, These papors aro not meant to oprasont in any way the views of the U.S. Intemational Trade Commission or any of ils individual Commissioners. Working papers are circulated to promote the active exchange of ideas between USITC Stat and recognized experts outside the USITC and to promote Professional development of Oice Staf by encouraging outside professional criique of staff research The Effects of Offshoring on Domestic Workers: A Review of the Literature Andre Barbe and David Riker Office of Economics Working Paper 2017-10-A October 2017 ABSTRACT This review of the economics Iterature on offshoring descrbes the trade in tasks framework that modem sources use to Understand offsnoring, and then elscusses the four main Issues focused an in pror work (1) the relative price, productivity, and net effect of offshoring, (2) the different effects of offshoring for high and low skil workers; (3) the ciflerent types of offshoring: and (4) the relative importance of offshoring and tecnnological change. hitps:wwnusite govipublicatons/332:working_papers/ecwp-2017-10-a-10-03-17 him wnoart2121, 09:20 ‘THE EFFECTS OF OFFSHORING ON DOMESTIC WORKERS: Andre Barbe Office of Economic, Research Division Andre Barbe@usit gov David Riker Office of Economics, Research Division David Riker@usito gov 1 Introduction Ofshoring occurs when part of 2 supply chain i moved from one country to another For example, in the 1980s US. semiconductor manufacturers typeally produce, azembled, tested, and packaged ener semiconductors entrely in the United States (Grown, Linden, and Macher 2608), Yoday, US. semiconductor manufacturers stl produce the semiconductor wafers In the United States, but the assembly, testing, and packaging steps are usually done abroad. Simla trends ae also seen in other manvtacturng industries suchas automobiles, furniture textes, and apparel. In 1982 US. multinationals had 30 of ther labor force in foreign afiates from 30% (Harrison and MeMillan 2011). By 2014, it had increased to 60% @. a ‘The decades of increased offshoring also saw substantial changes in employment inthe U.S. manufacturing sector. The number of Americans employes in manufacturing all rom almost 20 milion in 1580 toile over 12 milion in 2017 (see Fgure 1) At the sare timer inequality increased in the manufacturing. sector. The rato of conproductan te praducsan workers employed In Us. ‘manfectuting increased from 35:100 in 1980 to almost 49:100 in 2011 (Feenstra 2017). Rod! the wages of nonpraduetion workers increased from 50% higher than production workers in 1980 to 85% higher in 2011 (Fenstra 2017), There fa belie that production jobs Inmanufactring ance allowed even low skl workers to acque high paying Jobs, but that these opportunites are now dissppesing Offshoring has been put forth as an explanation fortis trend. The story typically goes something lke ths the costs of offshoring have been fling for cecades, This has reduced the relative pice to U., firms of fore labor 8s compared to Us, labor. Ths reatve Brice effect then caused firms to increase their demand for foregn labor and resice their cemand for domestic labor. 8s 2 res, employment and wages of domestic labor ell ‘A large literature has developed to investigate this claim and examine alternatve explanation. The Iterture has found four ‘main issues that eve the analss of offshoring: (1) Wade in task, (2) the relative pice, producton, and net effects of efsharng, 3) heterogeneity and (4) technological change, Fist, not only an goods be traded across countries, but the tasks that make up a goad can also be located across multiple countries. Thinking of offshoring in tis manner reveals eects that would be ignored Ina framework with only trade in goods. Second, offshoring occurs through several diferent elects. And although the relative price affect decreases domestic employment, the productivity elect increases i As 2 rsul, he iterature has generally fund the net effect of effharing on damestc employment to either be zero, or only milly negatve ‘Third, there isa large amount of heterogeneity in both the things that are labeled “offshoring” and the diferent effects it ean have for atfrent groups. Ae result, ffshoning can have different effects an employment or wages, depending on whic type of afsharng or whose employment and wages you are referring to. Tplaly,ofsharing better for higher sl workers than lower sk ‘workers and serie offshoring is better for doreste workers than material ofshoring, Fourth, technical change inthe form of increased automation has also occurred during this time perio, and thus san alternative explanation forthe fall n domestic manutacturing employment. The iterature has consistently found that technological change was Fesporsble for move change In employmeat than offshoring However, les important than technology” covers a wide range a! Impacts, fn there i less agreement on the share attributable o offshoring ‘The remainder of ths paper gives an overview ofthe Iterature on each ofthese topes. Section 2 discusses the trade in tasks framework. Section 3 dscusses the relative rie, productivity and net effects of offshoring. Section 4 discusses the efferent effects of sharing for high and low skied workers. Section 5 lscusses diferent types af offshoring. Section 6 discusses the elatve importance of ofshoring and technology in exlaining emplayment ends. Section 7 concludes. hitpsswnusite govipublicatons/332:working_papers/ecwp-2017-10-a-10-08-17 him03/12121, 09:20, ‘THE EFFECTS OF OFFSHORING ON DOMESTIC WORKERS: 2 Offshoring as Trade in Tasks Historical, trade could be cnaracterzed by the exchange of goods between diferent countries. And so models of trade used frameworks in which goods are creates in iferent countries from factars of production (lke aber and capital) a those countries. Sutin thelr seminal paper, Grossman and RossiMansberg (2008) argue that modern trade i better characterized by small amounts of vale being added In many diferent locations. This occurs through extensive trade In intermediate forms of the good, as well 25 the International locaton of itangble production tasks, such a design, managemert, oT support (Oléensl 2012) ‘Grossman and RossHansberg (2008) propose modeling moder trade using anew framework that they call trade in "asks In it factors of production ate fist combined to compete tasks, and then tasks ate combined to ereate goods, The Innovation ofthe new ‘ameworkis at 2 single goed can be produced from tasis completed in mulspe countries, using the lower prices fa factors of produetion in those countries. However, there afe costs to ofshoring and some tasks are more cost to ofshore than others. These tradeoffs over the location of afore tasks determine frm! afshoring decisions, ‘The trade in tasks framework makes a number of assumptions and predictions that have been verified in subsequent work. For example, the model predicted the existence ofthe productivity effect subsequently measured by Amit and Wei (2008), Otaviano Perl, fang Weight (2013), and Wright (2014). The model assumes that task characteristics Ike the imporance of communcating with istomers} are predictive ofthe amount of ofshoring done by firms in that industry, and ths prediion was veries by Oldersl (2012) and Wright (2014). Grossman and Rossi-Hansberg (2008) also predets that occupations that do tasks that are more easily rageable are ‘more lly o be ofshored and thus wil experience larger wage crops. The employment effect was empirically found by Crinb (2030) and the wage effect was found by Hummels e a. (2014). As 9 result of is empirical and Uheoretieal suppor, trade In tasks s the main framework uses for understanding ofshoring today. 3. The Relative Price, Productivity, and Net Effects of Offshoring 3.1 Understanding the Effects of Offshoring ‘reduction in te cost offshoring affects arm's production decisions through two main channels a rlative price effect and @ 2 productivity etect|”! these are analogous to the substtuien and income fect ina consumer optimization problem. Uke in the tution eet, when the price ofan input (ike foreign abor fal, other Inputs re reatvely mare expensive, eating rms Suostue towards the foreign lbor whose price fel and posi away trom the doves lsber whese pie ais net crane (more on that “possly” i the relate pnce sector), Howewe, h addton tthe eatwe prce efect, 2 drop n the price of foregn aber decreases the toa ox of producing aunt of the good. This pradtnty effec increases the euantty ofthe good demanded ne te {ant ofa inputs ved nclding domestic labor. The nt eet of 9 rediton in fring costs on comes bor demant the ‘sum of the relative price and productivity effects, a 3.2. Relative Price Effect ‘We've discussed now offshoring lowers the cost of foreign relative to domestic production and described a story where this leads to substitution away from domestic workers. But such substitution not meultabe: whether occurs of not depends on whether fore gn and domestic workers are complements or substitutes In the fem’ producton process. For example, Imagine the firm's producon process had domestic workers design ther products, which were then assembled abroad. In such cate, the wo Types of spor are Complements because both stages of production will expand or contract together when the price of one of he types of abor changes. ft isthus an empirical question as to whether ths relate price effect has einer a postive or negasve effect on Gomestc employment ‘review oy Crind (200) states that while large numberof studies ind that domestic and foreign labor are subectutes, te elaonsh is ‘weak Mare recent researeh suchas Ottaviano, Pr, and Wright (2013) has also found thatthe two ae substutes 33. Productivity Effect Research has generally found the productivity effect tobe large. Ami and Wel (2009) found that offshoring accounts for around 45 percent of the labor productivity growth from 1982 to 2000. Ottavane, Per, and Wright (2013) finds that an inzease inthe share of ‘share employment by 1 percent is associates with an Increase in agaegate employmeat (of efshare plus domeste) of 1.7 percent. Wir (2014) finds 2 smaller productvty effect where the productivity effect of 3 one percentage point Incaase Inthe extent oF cofshorngoffees 69 percent ofthe negative relative price eect. 34 Net Effect Tenet effect ofa reduction in offshoring costs on domestic employment isthe sum ofthe relative price and productivity affects. ‘though the consensus on the relative pre effect means that offshore ana domestic labor ate gross substitutes, they may be net Substitutes, or net complements, depenging on the sine of the negatve restive price effect compared to the site of the postive productivity ettect ‘There are mined rests onthe effect of offshoring when all types of abor are combined. Ottavano, Peri and Wright (20:3) ind ‘that offshoring increases total domestic employment (summed over all worker ‘ypes) relatve to a scenario where al tasks were preformed domes In the industries most exposed to olfhoring, they find that native employment has aot een harmed, Sut Dromoted, due to an expansion of these domestic industries relative to others, Wright (2004) finds that the produtvty effect only (fete 69 percent ofthe relate price effect, so that an net, offshoring does reduce low-skl native employment. However, ths net effect ‘nly accounts fr approximately 6 percent of the average annual decline In production (low-skl) worker, 65/000 out of the 1.2 milan Jobs lost, However nate that while these are the impacts on US. workers on average, research has generally found the effets to Be Sflerent for ferent groups of workers and for diferent types of shorn 4 Different Effects of Offshoring for High and Low Skill Labor 4.1 Why Offshoring has Different Effects on High and Low Skill Labor hitps:wwnusite govipublicatons/332:working_papers/ecwp-2017-10-a-10-08-17 himoart2121, 09:20 ‘THE EFFECTS OF OFFSHORING ON DOMESTIC WORKERS: (One ofthe key areas of public cancern about offshoring is how ft may adversely impact lw ski worker. n particular, fms may have greater incentives to offshore the tasks of lw sk workers than high kl. This drven by the afferent tasks that high and low sll workers do, and te diferent costs offshoring these tasks From a fr’ perspective, offshoring a task reduces some costs but increases others. shoring to 2 low Income country wil typically reduce labor ‘costs, cue to lower wages in the ‘orlgn country. However, twill also Increase cess, due to the exsense of monitoring nd coord ating workers. A pofitmaximicng firm wil eshare a task f the net effect sto reduce costs. However, diferent tasks require more o les monitoring nd coordination, Asa result, offshoring s most ely to be cos effective for tasks where domestic wages are hig lave to orelgn wages, and the task requires ite maritorng or coord abon Different tasks have diferent wage ratios and require dlferent amounts of monitoring. in particular, firms are mor likly to ofshore stages of producnon that invoive more routine tasks and less communication (O'densk 2012) Since ow sll jobs ae correlated with more routine tasks, this means that low sk jbs are ore ey to Mave (her tasks ofshored Ths leas to larger relative price Impacts 3s well as larger productivity effets (Grossman and Ross Harsborg 2008}, However, while this story explains wy the impact of ofshering coud be cfferent on low ski workers than on high sil it doesn't measure these ferences. n order to answer that question, we Must review the empirical iterature ard wht Ik found 4.2. Empirical Evidence on the Effects for High and Low Skill Labor The Itersture has generally found offshoring to have dfferent elects for high and low skll labor. Many papers And that ofshoring benefits high sll workers relative to low stl wordes. Research has also typiealy found that the absolute effects on low sl fre negative. However there is less agreement on the effects af offshoring on high skill workers. The Wade in tasks Framework i 3 Diausile explanation fortis ack of consents, Papers have generaly found that high sil workers beneft from offshoring relative to low skll workers. Feenstra and Hanson (2001) show that ofsharing is associated with nceases In he share of wages pald to sll worse. Feenstra and Hanson (1999) found that offshoring was responsible for 15 percent of the increase in relative wages of nonproducion workers. Cn (2012), Crib (2010), and Crind (2003) found that it increased the relative demand fer skied worker. In particular, Crinb (2008) reviews the avaliable literature and concledes that offshoring has been an important determinant of sing wage inegusity during the 1980s. Grossman and Rossi Hansberg (2008) argue thatthe relative-price effect should reward high-skilled labor but harm lowskiled labor, for te usual [Stolper Samuelson reasons: when 2 good’ price fal, the return of the fator used intensely in ts production also fas. And Wati¢on ang MeMilan (2011) find that ofsherng has postive employment effets for frms whase workers do ferent tasks at home and broad, and negative employment effects when they do smlar tasks. One sight exception ' Ards, Garean, and Rossi Hansberg {2005 ino develops a theoretical model where It's posible for offering to lower wage inequality sled managements common and commuriation costs and sil overap are large. Papers have typically found the absolut impact of offshoring on fow sil workers to be negative. Hummels et al (2014) finds that ifa firm doubles its offshoring, its nsklled workers can expect a present sscounted value of wage losses equal to 11.5 percent over five years. Wright (2014) finds that effshorng to China Is responsible for 6 percent of the average anual gecine iy low sil worker temployment from 2001-2007, or 63,000 out of 1.2 milion jabs lst. rind (2012) finds that certain types of offshoring harm low sl workers! ‘The net eect of etshoring on high sel workers Is more contentious. Hummels etal 2014) fds that fa frm doubles its cofshoring its sklled workers can expecta present value of wage losses equal to 1.¢ percent over fie years. Although this sensitive to fhe definition of high skl, and for some deinsone, there ae net beneSts. Wright (2018 found that offshoring to China nada negate impact on low sil workers but that tncreased the employment of hgh kil workers by 1 percent. combining the estimates fr both low: and high ski worker types, offshoring to China resulted In an overall ierease In domestic empioyment of 2.6 percent over the petiod folowing China's accession tothe WO. 4.3. Evidence for the Trade in Tasks Explanation Differences in tasks for sifferent jobs can explain the differential effects for high and low sll workers. Hummels etal (2024) finds thatthe impact of offnoring on workers depends on the tar in Viele oecupation. Oldenst (2012) looks specialy at services lfshoring and finds that routine jobs are offshored, but non~outin are no, leading to igh skl, igh pay Js being performed in the United states, ail low sil Tow paying jobs are moved abroad. Ottaviano, Peri, and Wright (2013) fads that ffshoring leads to inereased polarization in native and immigrant specalaton, mainly by pushing natvestowerd more complex obs, effectively hollowing atthe tsk specrum, Tasts could also explain the disagreement over the impact of ofshoring on high skill workers: Hummels et al. (2034) finds that ‘occupations with routine tasks experience lager wage drops, accupations with math, language, or socal scence ts45 gan, and Workers with haturalseience or engineering tasks were unafecte, 5 _ Different Types of Offshoring ‘Amber o diferent phenomena ae lumped together under the label of “offshoring” This ikely because the true framework, trade in tasks i fiat to observe. Asa result, other dimensions of heterogeneity may be suse instead as proses fr unobservable task rade The iterature hae focused on two such dimensions the income leve ofthe Country beng afthored to, and whether the job being ofshored is material or service related, ‘These observable characteris are likely corelated with certain tasks. For example, diferent types of asks ace going to be cofshored to high income countries than low income countries. Simlaly, when services are offshoved,cferent tasks are Rong t0 be ‘ofshored than in material ofshoring 5.1 Income Level of Offshore Country hitps:wwnusite govipublicatons/332:working_papers/ecwp-2017-10-a-10-08-17 him03/12121, 09:20, ‘THE EFFECTS OF OFFSHORING ON DOMESTIC WORKERS: ‘Several papers have found that offsoring to high income countries has negatve effects on U.S. employment. Crino (2009) argues that the main sbsbtute for domes labor's foreig labor In high income counties, nt foreign aber in low come counties. Sraly, Harrson and MeMilan (2011) find that home and foreign taka are simi, foreign and domestic employees are substitutes’ 9 4 percentage point fallin afiate wages is associated with reduesons in parent employment of between 0.0 and 0.6 percent. However, {ass are different, then they are complements: 21 percentage point decline in loincome afllate wages I assocated with Increases 0 parent employment of between 0.1 and 0.8 percent 5.2 Material and Service Offshoring Firms may offshore mary diferent parts of thelr production process. If they ofshore the production ofa physical good thats then imported, that sealed mater oshoring, However, i they ofshore some service (sch as IT support, produc desig, or research fand development) then ttf called service offshoring. Material ofehoring wat te predominant type of afshoring befor 1990, wile Service offshoring became much more prominent afterward (Feenstra 2017}. ‘These two types of offshoring are distinct, a5 workers engaged in either ofthese acowies are responsible for vey afferent tasks. As 9 result, we mgt suspeet that these two types offshoring could have fecent effects on workers. Moreover, since workers tngaged in services are typically more high sled than those in production, these diferent types offshoring could easly impact high Snd low sled workers afferent. Researches looking at this issue have generally found more positive effects fr service offshoring than material offshoring. rind (2009) condets a thorough reveew of the Iterature up through 2008. Reveareners found that materalolfehorng worsens wage inequality between seiles and unskiled workers However, wnile service ofshoring shits workforce composition towards kil labor, has at mast a small negaive impact on tosal employment. Mare recent research has produced mos slr results. cing (2012) finds {at both material and sevice offshoring raise demand for high and medium skiled workers relative to low Sil, though the elects are Small. Sitehinava (2008) finds that materials ofshoring increased the relate wages for skled workers while serice offshoring acted inthe opposite direction, increasing the relative wage of unskilled workers, Arti and We (2009) found that services offshoring was responsible for 10 percent of labors productivity growth, and 5 percent for material offshoring, 6 Technological Change as an Alternative Explanation for the Decline of Domestic Manufacturing. 6.1. Changing Views on Technology versus Offshoring Economists italy identified technological progress 35 the main culprit forthe increase in the relative demand fr skied fbor New tecmnologes tend to complement shiled workers but substkute for unskilled workers resuting in sklbaved teennical change (crind 2009). Asa esut, the rapid technological progress in computers since the 2980s could explain why the demand for sled labor inereased uring that time peri, Crinb (2008) reviews a numberof empirial studies from 1998 to 2003 that confirm tis prediction ‘This inital work identified @ number af acts that seemed 9 rule ou offshoring as an explanation. As noted by Feenstra 2017}, 2 simple Heckscher-Ohlin model would requeofshorng to generate efferent relasve wage efecs in tne home and foreign county. But that was not what was ebserved. Studies such as Berman, Bound, and Machin (1998) confirmed thatthe same shift towards shiled workers the US also oecured abroad owever, the international trade literature hes proposed new mechanisms that would allow for offshoring to produce labor dderand effects that are consistent with these observation. (1) Ofshorng coud self cause ski biased tecncal change, (2) t could ‘Cause sll-biased sale effects that act smal to teennical chang, of (3) I could be speceally the materia offshoring thas the cause the labor market changes (Crin® 2005) By these mechanisms ofshoring may produce labor effects similar to thse of technological ‘change. Thishas resulted in a reevaluation of the relative impacto offshoring and technological change 6.2. Empirical Evidence on Offshoring vs Technology Recent research has shown that olshoring i responsibie for some of the change in relative demand, but most is due to technological change. The iterature before 2008 generally found that mater'al offshoring increases the employment and wage snare of shld workers, but stusies rarely nla it responsible for most of the observes changes (criné 2003}. More recently, Harrison and ‘Mewtilan (2013) find that that offhoring Is not the primary diver of ecining domestic employment. of U.S. manufacturing multinationals between 1977 and 2998: i is primarily due to technological change. However, Stehinava (2008) found that wile shoring was an important driver of growing wage inequality, the role of technology was inconclusive 7 Conclusion ‘Offshoring isa contentious poll issue. Unfortunately tis so @ complex economic fssue, with many subtle aspects in which 2 simple made! may over simpy and thus mise Key mecnanisms or outcomes, But by using the trace in task framework we are abet {rink about the problem In 2 way that keeps the necessary detais but amts the unnecessary ones. Continued application of ths Framework in future work wil Increase our understasding ofthe key issues Is offshoring: (1 te elative pice, product, and het effect of orshorng, 2} the cferent effect of offshoring for high and low stil workers, 3) the cifferent types of otshorng, and (2) te Felative importance of offshoring and technological change. 8 References ‘mit, Mary, an Shang ln Wel. 2008. Service Offshoring and Productivity: Euldence from the US” World Economy 32 (2}: 203-20, ois10.1111/}.1467-8701.2008.01143. ‘Antrts, Po, Luis Garleane nc Esteban Rass-Hansberg. 2006, “shoring in a Knowedge Economy” Quarterly Journal of Economics 122 (1: 31-77. doit0.1083/9/121.1 31. hitps:wwnusite govipublicatons/332:working_papers/ecwp-2017-10-a-10-08-17 him03/12121, 09:20, ‘THE EFFECTS OF OFFSHORING ON DOMESTIC WORKERS: ‘Berman, fl Jha Bound, and Stephen Machin. 1988, “Inpliations of SllSiased Teehnoloical Change: international Evidence” The ‘Quarterly Journal of Economic. Oxford Univesity Press. do20,2307/2586580 ‘row, Cr, Greg Linden, and ere T. Macher 2006. “Ofshoringin the Semiconductor Industry: A Historical Perspective [wth ‘Comment and Discusson|” Brookings Trade Forum. Brookings isttton Press. oi:10.2307/250S8769, ‘Bureau of Economic Analysis. 2017 "Worldwide Activites of US. Mulnatonal Enterprises: Preliminary Results From the 2014 ‘Benchmark Survey” haps/fwww.bes,gv/internatonalfusela2014p hem, ind, Rosario. 2009. Ofshoring, Multinationals and Labour Market: A Review ofthe Empirical Lerature” Journal ef Economie Surveys 23 2}: 197-249, do':10.1111/, 1467-6429 2008,00561 2010. “Service ofshoring and WhiteColar Employment” Review of Economie Stdies 772}: 895-632. dol:10.1121/, 467 '937%.2009.586, 2012, “Service Ofshoring and the Skil Composition of Labour Demand Oxford Bulletin of Econcmics and Sttistis 78 (1:20 ~S7. do 10.1211/). 1468-0084 2010-00634. Feenstra, Robert C2017. “Statsies to Measute Offshoring and ts impact.” Cambridge, MA. do:10:3386/W23067, Feenstra, Robert, and Gordon Hanson, 2001, “Global Production Sharing and Rising Inequality: Survey of Trade and Wages" (Combage, MA. do: 10-3385/ 68372, Feenstra, Robert and Gordon # Hanson, 1989. “The Impact of Outsourcing and High-Technoogy Capital on Wages: states forthe United States, 1979-19907 Quartery Journal of Economies 11 (3) 907-40, Ntps://wwstor.org/stable/2586887, Grossman, Gene M, and Esteban Rossi-Hansberg, 2008, “Trading in Tasks: A Simple Theory of Ofshoring” American Economic Review 98 {5}: 1978-97. dok 10 2307/29730158, Harrison, nn, and Margaret MeMilan, 2012, “Offshoring Jobs? Muitnationals and US. Manufacturing Employment” The Review of Feopomics and Stats 93 3) 857-75, do:10.1162/REST_2 00085, Hummels, David, Rasmus Jargensen, Jakob Munch, and Chong Mang. 2014. “The Wage Effects of Offshoring: Evidence from Danish ‘Matched Warkeriem Data” The American Economic Review. American Economie Assocation do 10-2307/82920860. (Oldenski, Lindsay. 2012. "The Task Composition of Offshoring by U.S. Multinationals" International Economic 13 (September). CEPI 5 21 doe0.1016/82110-7017113}500529. Dttavano,Gianmaro |, Giovanni Peri ane Greg C. Wright, 2013, “Immigration, Ofshoring, and American Jobs" American Feonomlc Review 1035): 1925-59, do10.125?/aec103.5.1925, Sithinava, Nino, 2008. “rade, Technology, and Wage Inequality: Evidence from US. Manufacturing, 1889-2004" University of Oregon, Wright, Greg C. 2014 "Revisting the Employment impact of OfShoring” European Economic Review 6. Esever 63-83. oi10.1016/ evroecorev.2013.1.008, hitps:wwnusite govipublicatons/332:working_papers/ecwp-2017-10-a-10-08-17 him03/12/21, 08:20, ‘THE EFFECTS OF OFFSHORING ON DOMESTIC WORKERS: '2] nen production is moved abroad, t may ether be done by 2 foreign affiliate thet spar of the same mult-sational enters, or done by 20 alate fr. The Busines IRerature tyialy only eet othe former process as offshoring, The Indus organuation and intemational Wade ‘eratutes refer to the sur ofthe two 38 offshoring, and that the definition we wl us inthis pape (ind 2009), |2l he relative price eect sometimes referre to asthe slspacement eet, such asin tavana, Perl and Wright (213) i) |= fennel, ase ae only the partial equlibiam eft of oshorng. In a general equiloium setting, shoring would aso impact emstoyment ‘hough is iferenal impact on industries with liferent ator intensities, and eduction Inthe ree of inal consumer goods. The iterature hat ess to say on these general equlrum effects, 35 they are typical assumed to be of second order importance, but I may representa ffl re or future esearch |" pect, rind (2012) fs that materi fsbving hers ow kil bu serve ofshoring doesnot. This tineion between seve and mata cofshoringis explained in Seton 5 hntipsutweaw.uste govipublcations/332\working_paperslecwp-2017-10-3-10-03-17 him a"