Abstract
This paper uses a city-level computable general equilibrium (CGE) model to examine the impacts of offshoring for three different periods in the US economy for cities that did not lose jobs to firms relocating overseas. We examine offshoring of final retail and merchandising goods in the 1950- 1980 period, manufactured goods (intermediate goods) in the 1970-2000 period, and current service sector and high-skilled jobs. The impacts of offshoring vary considerably over these time periods. Most notably, when offshoring occurs in high-skilled industries such as computer software and bioengineering, the contributions to economic growth will be smaller compared to the retail and manufacturing experiences over the last 60 years. The results also show wage and per household income effects.
Highlights
The impact of offshoring on the US economy does not appear to be large, but a closer look at the city level reveals important impacts
The first offshoring period occurred in the final retail and merchandising industry during 1950-1980. (Offshoring occurred in other sectors in this period as [1] asserted that information technology (IT) offshoring began in 1949 with ADP and payroll processing; [1] stated that IT offshoring on a large scale is from a 1990 decision by Eastman-Kodak to outsource most of their IT functions.) The second period of offshoring involved a wide range of manufacturing goods used as intermediate inputs which began in 1970-2000
Lower retail import prices causes the price of retail goods to fall and since retail purchases are the largest component in the consumption function (Table 1), the city CPI falls which leads to positive real income effects for consumers
Summary
The impact of offshoring on the US economy does not appear to be large, but a closer look at the city level reveals important impacts. The locations of manufacturing firms in the 1970s were primarily located in the eastern and Midwestern parts of the US allowing the rest of the US to benefit from lower-priced intermediate manufactured goods Sectors such as legal and medical are starting to use overseas services to lower prices of the final services produced in the US. An important advantage of a CGE model is that lower import prices will impact household demand and the intermediate input mix used by many sectors Both of these channels have important effects on understanding the economic impacts of offshoring. Our results show that the offshoring of manufactured goods had the largest effect due to the relative importance of manufactured goods used as intermediate inputs by many sectors in the economy. Our results show important wage and household income effects
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
