Teresa Fort, Dartmouth College (visiting Princeton)
Presenter: Teresa Fort, Associate Professor of Business Administration, Tuck School of Business at Dartmouth
Paper: Heterogeneous Globalization: Offshoring and Reorganization
Abstract: This paper examines the impacts of offshoring by analyzing how it affects firms’ allocation of resources across activities. We address three key questions. First, we use detailed new data to provide a clear measure of offshoring and to document how it relates to firms’ trading decisions. Offshoring firms tend to produce and import the same products, even after offshoring begins. Second, we show that new industry measures of offshoring based on a firm’s imports of goods that it produces domestically differ markedly from measures based on imported goods that the importer does not produce. Standard measures of import competition contain both types of imports, thereby confounding the effects of import competition and offshoring. Third, we exploit these differences between offshoring and import competition to identify the impact of offshoring on firms’ decisions to reallocate labor away from direct production work towards technology-related occupations. This reallocation of workers is accompanied by increases in offshoring firms’ product development and R&D spending. Firm reorganization highlights the importance of a new channel in which offshoring affects innovation, and may ultimately affect economic performance and growth as well.
The International Economics Seminar series is presented jointly with the Walsh School of Foreign Service and the Economics Department of Georgetown University.