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The Politics and Economics of Offshore Outsourcing

Anyone wanting to understand the debate over outsourcing should have a look at this paper by former Bush insider Greg Mankiw and Philip Swagel:

The Politics and Economics of Offshore Outsourcing
NBER Working Paper No. 12398
Issued in July 2006
link (free to .gov and universities that subscribe to NBER, follow link titled "Information for subscribers and others expecting no-cost downloads")

Abstract: This paper reviews the political uproar over offshore outsourcing connected with the release of the Economic Report of the President (ERP) in February 2004, examines the differing ways in which economists and non-economists talk about offshore outsourcing, and assesses the empirical evidence on the importance of offshore outsourcing in accounting for the weak labor market from 2001 to 2004. Even with important gaps in the data, the empirical literature is able to conclude that offshore outsourcing is unlikely to have accounted for a meaningful part of the job losses in the recent downturn or contributed much to the slow labor market rebound. The empirical evidence to date, while still tentative, actually suggests that increased employment in the overseas affiliates of U.S. multinationals is associated with more employment in the U.S. parent rather than less.