The task composition of offshoring by U.S. multinationals

Abstract

Recent advances in communications technology allow for greater fragmentation of production across borders in both goods and services. However, this fragmentation is difficult to observe in the existing trade data. To get around this lack of data, several recent papers have used the task content of occupations as a proxy for offshorabilty. Up until this point, that relationship between tasks and offshorabilty has been based on intuition, rather than empirical evidence. In this paper, I use confidential data from firm-level surveys to offer the first empirical evidence on the link between tasks and offshoring. The results show that US multinationals are significantly more likely to perform a stage of production at a foreign affiliate the more intensively that input uses routine tasks, and the less intensively it uses communication tasks.