Can Globalization and Outsourcing Be Blamed?

Also released this week, and related to the negative change of U.S. manufacturing employment, is a new working paper by members of the National Bureau of Economic Research. Outsourcing Jobs? Multinationals and US Employment, by Ann Harrison and Margaret McMillan, examines the labor market decisions of U.S. multinationals at home and abroad for the years 1977 to 1999. Using firm level data collected by the U.S. Bureau of Economic Analysis, the authors econometric model reveals changes in the employment and operations of U.S. multinationals is correlated to whether the affiliated country is a low-income or high-income nation.



Using a variety of different theoretical approaches to estimating labor demand and a range of econometric techniques, Harrison and McMillan found, as one might expect, that "employment in low income countries substitutes for employment at home. Employment in high income affiliates, however, is generally complementary with U.S. employment. Second, U.S. capital investments in both high and low income affiliates are associated with lower employment in the United States."



In addition, the model's results show that "other factors have made important contributions to falling manufacturing employment in the United States, including technological change and import competition. Taken together, our results suggest that concerns over the impact of globalization on U.S. jobs are grounded in reality," the authors write.



Outsourcing Jobs? Multinationals and US Employment is available for purchase at: http://papers.nber.org/papers/W12372



Links to this paper and more than 4,000 additional TBED-related research reports, strategic plans and other papers can be found at the Tech-based Economic Development (TBED) Resource Center, jointly developed by the Technology Administration and SSTI, at: http://www.tbedresourcecenter.org/.