William Milberg

William MilbergWilliam Milberg is Professor of Economics at the New School for Social Research in New York. He has served as a consultant to the ILO, the World Bank and UNCTAD. He is the co-author of the thirteenth edition of The Making of Economic Society, The Crisis of Vision in Modern Economic Thought, and Outsourcing Economics: Global Value Chains in Capitalist Development. He is also the editor of Labor and the Globalization of Production. Professor Milberg received his PhD in Economics from Rutgers University.

Papers Published in World Economics:

Offshoring and the Labour Share in Germany and US

Despite broad public concern with the effect of offshoring on inequality, there is scant research. The authors shift the focus to the effect of offshoring on the labour share in value added. Regression analysis for a sample of 14 OECD countries in 21 manufacturing sectors covering the period 1995 to 2008 reveals that the effects of offshoring on the labour share are negative. They also show that different policy regimes with regard to labour markets, education and innovation, and trade liberalisation mediate these effects whilst contrasting the experiences of Germany and the U.S. where the manufacturing labour share decline was particularly strong.

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Bias in the ‘Proportionality Assumption’ Used in the Measurement of Offshoring

Most studies of offshoring rely on a ‘proportionality assumption’ where every sector is assumed to import each material and service input in the same proportion as its economy-wide use. We assess the bias resulting from this assumption. Since Germany collects imported inputs directly, we are able to compare the direct and proxy measures, where the proxy is constructed with the proportionality assumption. The proxy fails to accurately capture the variation in services offshoring intensity because – as a result of the proportionality assumption – it is strongly influenced by the variation in demand for domestic inputs. Estimation of the effect of offshoring on labour demand for 35 manufacturing sectors in Germany over 1995–2006 shows that the direct and proxy-based measures of services offshoring give very different results. The implication goes beyond the case of Germany: researchers must be cautious about drawing policy conclusions from estimates using the proxy of offshoring.

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