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The Determinants of Outsourcing from the U. S.: Evidence from Domestic Manufacturing Industries, 1972-2002

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  • Maxim, Belenkiy

Abstract

The issue of outsourcing as a form of foreign direct investment (FDI) has been widely discussed in the recent past. In this essay, I analyze what determines the outsourcing activity by looking at U. S. manufacturing industries between 1972 and 2002. I concentrate on correlation between the measure of outsourcing and wages, bargaining coverage contracts, transportation costs, and private gross fixed investment in information technology. My analysis finds differences in the effects of wages on outsourcing activity depending on the type of industry (i.e., whether the industry produces durable or non-durable goods). The main regression model finds that wages and union coverage cannot fully explain the colossal increase in outsourcing activity in the last three decades. Rather, the primary factors influencing the increase in outsourcing are likely to be the growth in foreign productivity and technological changes that allow more international specialization in the intermediate production stages of the final good.

Suggested Citation

  • Maxim, Belenkiy, 2005. "The Determinants of Outsourcing from the U. S.: Evidence from Domestic Manufacturing Industries, 1972-2002," MPRA Paper 17911, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17911
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    References listed on IDEAS

    as
    1. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 135-159.
    2. Robert E. Lipsey, 1995. "Outward Direct Investment and the U.S. Economy," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 7-42, National Bureau of Economic Research, Inc.
    3. Gust, Christopher & Marquez, Jaime, 2004. "International comparisons of productivity growth: the role of information technology and regulatory practices," Labour Economics, Elsevier, vol. 11(1), pages 33-58, February.
    4. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
    5. repec:pri:wwseco:dp218 is not listed on IDEAS
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    More about this item

    Keywords

    Outsourcing; Estimation;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F1 - International Economics - - Trade
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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