Local labor market effects of offshoring: Evidence from the US Trade Adjustment Assistance program

Abstract

We explore the wage effects of offshoring-induced employment shocks in US commuting zones (CZs) and industries. Using data on petitions for the Trade Adjustment Assistance (TAA), we measure such shocks by computing the share of TAA-certified offshoring-induced layoffs out of total employment. We further identify material-offshoring shocks and service-offshoring shocks and connect the TAA data to individual-level worker data from the American Community Survey. Empirical results show statistically significant and negative wage effects of the CZ-level offshoring shocks, especially for service offshoring. On the contrary, we find positive wage effects of industry-level offshoring shocks in industries exposed to both types of offshoring. Furthermore, we show that offshoring is associated with the widening gender wage gap in local labor markets and that workers in production and highly-offshorable occupations are more vulnerable to the CZ-level offshoring shocks.