Table 6 shows the relationship between U.S. employment and offshore affiliate employment at the industry level. Columns 1 and 2 present the OLS results, and columns 3 and 4 show the instrumental variables results. As in the multinational parent-level analysis, the estimates are positive, implying that the various margins just discussed combine to yield modest increases in domestic industry employment when affiliates of multinational firms in that industry experience BTT-induced reductions in the cost of foreign affiliate activity. The IV estimates are approximately half the size of the corresponding OLS estimates, confirming the importance of appropriately addressing the simultaneity issue. The IV estimates are small in magnitude and significant at the 5% level, suggesting that the negative effects from equilibrium adjustments to employment and any offshoring by new multinationals at the industry level offset much, but not all, of the gain in domestic employment within existing multinationals.

Table 6.

U.S. Industry-Level Analysis: The Effect of Offshore Employment on U.S. Industry Employment

Dependent Variable: Log Industry Employment—$ln(Lit)$
(1)(2)(3)(4)
SpecificationOLSOLSIVIV
log affiliate employment: 0.013*** 0.011** 0.006** 0.006**
($lnMit$(0.005) (0.005) (0.003) (0.003)
$ln(GDPus+GDPd)$  −0.062  −0.017
(0.094)  (0.06)
$ln(GDPus-GDPd)2$  0.023  0.006
(0.048)  (0.018)
$ln(SkillDifference)$  0.029  0.01
(0.046)  (0.017)
$ln(TradeCosts)$  0.031**  0.011**
(0.014)  (0.005)
BIT  −0.019  −0.006
(0.056)  (0.021)
FTA  0.036  0.013
(0.043)  (0.016)
Exchange Rate  −0.000  −0.000
(0.000)  (0.000)
Industry FE YES YES YES YES
Year FE YES YES YES YES
$N$ 1,268 1,268 1,268 1,268
$R$-squared 0.4836 0.5309 0.4821 0.5292
First-Stage $F$-Statistic – – 234.99 208.2
Endogenous Test $p$-Value – – 0.0213 0.0225
Dependent Variable: Log Industry Employment—$ln(Lit)$
(1)(2)(3)(4)
SpecificationOLSOLSIVIV
log affiliate employment: 0.013*** 0.011** 0.006** 0.006**
($lnMit$(0.005) (0.005) (0.003) (0.003)
$ln(GDPus+GDPd)$  −0.062  −0.017
(0.094)  (0.06)
$ln(GDPus-GDPd)2$  0.023  0.006
(0.048)  (0.018)
$ln(SkillDifference)$  0.029  0.01
(0.046)  (0.017)
$ln(TradeCosts)$  0.031**  0.011**
(0.014)  (0.005)
BIT  −0.019  −0.006
(0.056)  (0.021)
FTA  0.036  0.013
(0.043)  (0.016)
Exchange Rate  −0.000  −0.000
(0.000)  (0.000)
Industry FE YES YES YES YES
Year FE YES YES YES YES
$N$ 1,268 1,268 1,268 1,268
$R$-squared 0.4836 0.5309 0.4821 0.5292
First-Stage $F$-Statistic – – 234.99 208.2
Endogenous Test $p$-Value – – 0.0213 0.0225

Documents the effects of BTT-induced changes in foreign-affiliate employment at the industry level for industries that exhibit high ratios of royalty, interest, and dividend payments relative to total industry sales. First-stage $F$-statistics are large for all IV specifications, though the relevant $F$-statistics for weak-instrument concerns appear in columns 2 and 5 of table 4 (see text for discussion). In all IV specifications, the equality of OLS and IV is rejected. Sample covers 1987–2007. Standard errors clustered by industry and year are in parentheses. Significant at $*$10%, **5%, and ***1%.

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