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Eastern Economic Journal

, Volume 44, Issue 2, pp 242–272 | Cite as

The Cleansing Effect of Offshoring in an Analysis of Employment

  • Jooyoun Park
Article
  • 50 Downloads

Abstract

This paper uses a partial equilibrium heterogeneous firm model to explore distinctive firm-level operational responses to offshoring and the resulting short-run employment effect. We find that the industry-level effect is unambiguously negative and this is largely due to large job destruction from the exits of the least productive firms (Cleansing Effect). The numerical analysis, calibrated to the U.S. manufacturing sector, confirms the dominance of the cleansing effect in driving the reduction in industry-level employment. Offshorers still account for the majority of total job destruction; however, this is offset by subsequent job creation, partly from the increase in export opportunities.

Keywords

cleansing effect offshoring employment job destruction job creation 

JEL

F12 F14 F16 

Notes

Acknowledgments

The author thanks Alan Deardorff, Jeffrey Smith, Linda Tesar, Margaret Levenstein, Jagadeesh Sivadasan, Jing Zhang, and anonymous referees for thoughtful comments and suggestions. The author has also benefited from participants of the seminar at University of Michigan, Kent State University, and Northeast Ohio Economics Workshop, Midwest Economic Association 2011 meeting.

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Copyright information

© EEA 2016

Authors and Affiliations

  1. 1.Department of EconomicsKent State UniversityKentUSA

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