wisdom and raised concerns that services offshoring may harm white-collar workers just
as the globalization of trade damaged blue-collar manufacturing labor. Yet most services
that move offshore go to other skilled-labor rich countries, and this study of the motion
picture industry corroborates Baily and Lawrence (2004) in concluding that the data do
not suggest a large-scale movement of high-skilled service jobs to low-wage countries.
The next section reviews scholarly work on the motives for offshoring and its
economic effects. The third section presents the hypotheses to be tested: first, that
offshoring primarily harms low-skilled labor, not high-skilled labor, aggravating wage
inequality; and second, that these labor market effects place low-skilled labor and high-
skilled labor at odds on trade issues. The fourth section estimates the growing prevalence
of offshoring in motion picture production. The fifth section evaluates how offshoring
has affected different classes of labor in the motion picture industry and finds that wage
inequality has increased. The sixth section uses these labor market outcomes to show
how differences in labor skills create political divisions over trade remedies. The last
section discusses the implications for lobbying campaigns to limit offshoring.
Offshoring: The Economics and the Politics
Offshoring is not a new phenomenon. In manufactured goods such as microchips, cell
phones, computers, televisions, and automobiles, production routinely involves multiple
locations. Even a Barbie doll undergoes processing in six countries before reaching its
destination of final sale (Tempest 1996). Grunwald and Flamm (1985), one of the first
studies on the topic, found greater offshoring the more easily that stages of production
could be separated, the more labor-intensive the intermediate processes, and the lighter
the inputs compared to their value. As the relative cost of low-skilled manufacturing
labor increased in the United States, firms “began to look to other countries, breaking
production into stages and carrying out the labor-intensive processes in countries where
wages were low” (Grunwald and Flamm 1985, 10).
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Convention