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Working Paper
Sourcing substitution and related price index biases
We define a class of bias problems that arise when purchasers shift their expenditures among sellers charging different prices for units of precisely defined and interchangeable product items that are nevertheless regarded as different for the purposes of price measurement. For business-to-business transactions, these shifts can cause sourcing substitution bias in the Producer Price Index (PPI) and the Import Price Index (MPI), as well as potentially in the proposed new true Input Price Index (IPI). Similarly, when consumers shift their expenditures for the same products temporally to take ...
Working Paper
Gains from Offshoring? Evidence from U.S. Microdata
We construct a new linked data set with over one thousand offshoring events by matching Trade Adjustment Assistance program petition data to confidential data on U.S. firm operations. We exploit these data to assess how offshoring affects domestic firm-level aggregate employment, output, wages and productivity. Consistent with heterogenous firm models where offshoring involves a fixed cost, we find that the average offshoring firm is larger and more productive than the average non-offshorer. After initiating offshoring, firms experience large declines in employment (46.2 per cent), output ...
Working Paper
Outsourcing Policy and Worker Outcomes: Causal Evidence from a Mexican Ban
A weakening of labor protection policies is often invoked as one cause of observed monopsony power and the decline in labor’s share of income, but little evidence exists on the causal impact of labor policies on wage markdowns. Using confidential Mexican economic census data from 1994 to 2019, we document a rising trend over this period in on-site outsourcing. Then, leveraging data from a manufacturing panel survey from 2013 to 2023 and a natural experiment featuring a ban on domestic outsourcing in 2021, we show that the ban drastically reduced outsourcing, increased wages, and reduced ...