Labor Market Effects of Offshoring Within and Across Firm Boundaries
Early Career Research Award
We use a model of endogenous offshoring activities to derive multi-tier 2SLS empirical strategy and estimate the impact of offshore hiring on US domestic employment outcomes. Our empirical strategy uses the implementation of bilateral tax treaties as instruments for industry-time-country specific offshoring activity. Exploiting administrative data for US multinational firms from the US Bureau of Economic Analysis spanning two decades, we find that greater offshore hiring increases employment within US parent firms due to productivity/scale effects, but has substantially less benefit for industry-wide employment as substitution effects observed across firms that alter their global organization of production offset the employment gains observed within existing US multinational firms. Our results indicate that greater offshore activity raises net employment by US firms modestly.