Captive Offshoring by U.S. Multinationals: Measuring the Domestic Employment Impacts of Vertical FDI

Abstract

The pervasive and complex nature of "international outsourcing" has hampered efforts to quantify the importance of this phenomenon for national economies. Indeed, available evidence on the extent of "offshoring" associated with the U.S. economy is scant, rendering analyses of its economic impacts as unreliable at best. Attempts to gauge its direct employment effects must overcome definitional problems and data limitations, even if one ignores the immeasurable dimensions of this issue. The present study offers insight into the nature and extent of "captive offshoring" in relation to the entire U.S. economy. Using government data that report foreign affiliate sales back to U.S. parent firms, we provide a "ballpark" estimate of the potential for domestic employment loss associated with this type of foreign investment activity.