DP14485 Heterogeneous Globalization: Offshoring and Reorganization

Author(s): Andrew B. Bernard, Teresa Fort, Valerie Smeets, Frederic Warzynski
Publication Date: March 2020
Keyword(s): import competition, Innovation, offshoring, R&D, Skilled Workers, technology
JEL(s): F14, F61, L25
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14485

This paper exploits a unique offshoring survey to show that firms continue domestic production of the same goods they offshore to low-wage countries. This shift towards ``produced-good imports" coincides with a reallocation of labor from physical production to innovation and technology occupations, and an increase in domestically produced varieties' unit values. These responses suggest an additional, firm-level benefit of trade liberalization: the opportunity to offshore production of low-quality varieties, thereby freeing up resources for the development, production, and marketing of higher-quality varieties. Firms' reactions also motivate a new offshoring measure â?? produced-good imports â?? that is readily observed in most firm-level datasets.