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  3. Journal of Economic Literature
  4. September 2018
  5. Offshoring and Labor Markets

Journal of Economic Literature

ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)

Offshoring and Labor Markets

  • David Hummels
  • Jakob R. Munch
  • Chong Xiang
Journal of Economic Literature
vol. 56, no. 3, September 2018
(pp. 981–1028)
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Abstract

In this paper we survey the recent empirical literature on the effects of offshoring on wage, employment and displacement. We start with an overview of the measurement of offshoring, organizing our discussion around the three key elements of offshoring: that it involves intermediate inputs for production (vs. final goods for consumption); that it involves imported inputs (vs. domestically produced ones); and that the inputs involved could have been produced internally within the same firm. We then briefly discuss the theories of offshoring, and survey the literature that examines the wage effects of offshoring: the wave of studies using industry-level data; the wave using firm-level data; the wave using worker-level data; and the wave using matched worker-firm data. For each wave we highlight the identification strategies used, critically assess its strength and weakness, discuss its connections with theory, and draw out potential policy implications of its findings. Finally we survey the literature that examines how offshoring affects employment and displacement. We highlight the recent development of a novel cohort-based approach that is specifically designed to address selection with displacement, and capable of identifying the overall effects of offshoring, including wage, displacement, and all other types of transition.

Citation

Hummels, David, Jakob R. Munch, and Chong Xiang. 2018. "Offshoring and Labor Markets." Journal of Economic Literature, 56 (3): 981–1028. DOI: 10.1257/jel.20161150

Additional Materials

JEL Classification

  • F23 Multinational Firms; International Business
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • J63 Labor Turnover; Vacancies; Layoffs
  • L24 Contracting Out; Joint Ventures; Technology Licensing
  • M55 Personnel Economics: Labor Contracting Devices