Offshoring Bias In U.S. Manufacturing: Implications For Productivity And Value Added
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. The authors 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 are generally not captured in input cost and import price indexes. Although cost savings are a primary driver of the shift in sourcing to foreign suppliers, the price declines associated with offshoring are not systematically observed; this is the essence of the measurement problem.