"Essays on International Trade, Offshoring, and FDI"
Yoo, Myunghwan, Economics - Graduate School of Arts and Sciences, University of Virginia
Mclaren, John, AS-Economics, University of Virginia
Harrigan, James, AS-Economics, University of Virginia
Cosar, Kerem, AS-Economics, University of Virginia
With globalization, oﬀshoring and foreign direct investment (FDI) have been growing dramatically in recent decades. This dissertation studies the eﬀects of oﬀshoring and FDI on labor market outcomes and living standards. Chapter 1 focuses on estimating the eﬀect of material and service oﬀshoring on wages in South Korea. Chapter 2 investigates the eﬀect of inward FDI on income distribution and absolute living standards in Vietnam. Chapter 3 contributes to the empirical trade and oﬀshoring literature by estimating the eﬀects of the negative employment shock of oﬀshoring on individual wages across local labor markets. Below, I discuss each chapter in detail.
Chapter 1 is an empirical-oriented study on oﬀshoring and wages in South Korea. Using disaggregated Input-Output tables with detailed import matrices for South Korea between 2005 and 2014, I measure oﬀshoring directly, free of the erroneous proportionality assumption. I estimate the eﬀect of both material and service oﬀshoring on wages in South Korea. The results show no statistically-signiﬁcant eﬀect of oﬀshoring on wages at the industry level. However, at the occupation level, the eﬀect is statistically and economically signiﬁcant. An instrumental variable approach indicates that a one percent increase in material oﬀshoring results in a wage increase by 0.083 percent. This ﬁnding is driven by the workers in service sector who had not switched sector of employment. Material oﬀshoring appears to increase wage inequality among the workers who perform routine tasks and non-routine tasks in South Korea.
Chapter 2, coauthored with John McLaren, investigates the eﬀects of inward FDI on income distribution and absolute living standards in Vietnam using the Census data from 1989-2009. We compute the number of employees of foreign establishments in each of Vietnam’s provinces for each year, and use that as a measure of local FDI. We estimate the eﬀects of FDI on local households’ living standards as reported in the data, broken down by educational background to allow us to analyze eﬀects on inequality. Estimates based on the repeated cross section indicate that rising FDI in a province is associated with a slight decline in living standards for households there if they do not have a member employed by the foreign enterprises, with only modest gains for households who do have a member employed by the foreign enterprises. These estimates may reﬂect selection eﬀects, however, since we ﬁnd large movements of people toward the provinces receiving the FDI. The ﬁndings show that measuring the eﬀect of FDI on household welfare is more diﬃcult than measuring the eﬀect of trade policy, and may pose a diﬃculty for the view of FDI as a general anti-poverty strategy.
Chapter 3 examines the eﬀect of oﬀshoring-induced employment shock on wages of U.S. workers across local labor markets, joint with Hyejoon Im and Yang Shen. Using a dataset of petitions from the U.S. Trade Adjustment Assistance (TAA) program, we identify the oﬀshoring-induced layoﬀs by commuting zone and by industry. We construct a measure which captures the negative employment eﬀect of oﬀshoring. The measure is deﬁned as the share of oﬀshoring-induced layoﬀs out of the total employment in a commuting zone or industry. With this measure, we estimate the eﬀect of oﬀshoring-induced layoﬀs on wages and ﬁnd that among the observations exposed to negative employment shocks of oﬀshoring, a one-percentage-point increase in the share of oﬀshoring-induced layoﬀs at the commutingzone level is associated with a 1.024% decrease in individual wages.
PHD (Doctor of Philosophy)
Oﬀshoring, Wages, Proportionality Assumption, Occupation, FDI, Inequality, Living Standards, Local Labor Market, Trade Adjustment Assistance (TAA) Program
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