2006) "Dispelling Some Myths about Offshoring

Critics of globalization claim that firms are being driven to shift employment abroad by the prospects of cheaper labor. Yet the evidence for this, beyond anecdotes, is slim. In this article, we review evidence on whether firms that do business in foreign countries are substituting foreign for domestic labor. We review the results of previous studies and present new firm-level evidence showing that, in fact, increases in employment in low-income countries do hurt employment at home. The premise that foreign expansion of U.S. multinationals encourages employment at home is a myth, but the domestic employment costs of offshoring are probably fairly small in magnitude. Critics of globalization claim that U.S. firms areshutting down factories at home and shiftingemployment abroad to countries with cheaper labor and lower labor standards. Yet the evidence for this, beyond anecdotes, is slim. Are U.S. em-ployers really expanding in low cost locations and contracting employment at home? In a now-infa-mous press conference for the Economic Report of the President (2004), Gregory Mankiw pointed out that U.S. outsourcing is good for the U.S