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Title:Offshoring and the State of American manufacturing PDF Logo
Authors:Houseman, Susan
Kurz, Christopher
Lengermann, Paul
Mandel, Benjamin
Issue Date:2010
Series/Report no.:Upjohn Institute Working Paper 10-166
Abstract:The rapid growth of offshoring has sparked a contentious debate over its impact on the U.S. manufacturing sector, which has recorded steep employment declines yet strong output growth - a fact reconciled by the notable gains in manufacturing productivity. We maintain, however, that the dramatic acceleration of imports from developing countries has imparted a significant bias to the official statistics. In particular, the price declines associated with the shift to low-cost foreign suppliers generally are not captured in input cost and import price indexes. To assess the implications of offshoring bias for manufacturing productivity and value added, we implement the bias correction developed by Diewert and Nakamura (2009) to the input price index in a growth accounting framework, using a variety of assumptions about the magnitude of the discounts from offshoring. We find that from 1997 to 2007 average annual multifactor productivity growth in manufacturing was overstated by 0.1 to 0.2 percentage point and real value added growth by 0.2 to 0.5 percentage point. Furthermore, although the bias from offshoring represents a relatively small share of real value added growth in the computer and electronic products industry, it may have accounted for a fifth to a half of the growth in real value added in the rest of manufacturing.
Subjects:offshoring
manufacturing
price measurement
productivity
output growth
JEL:O41
O47
F14
L60
Document Type:Working Paper
Appears in Collections:Upjohn Institute Working Papers, W. E. Upjohn Institute for Employment Research

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