Following the global financial crisis, some advanced countries recognized that the manufacturing sectors play an important role in mitigating the negative effects of the economic crisis. Also, as there has been some indication of firms bringing back manufacturing activities back to their home countries in recent years, reshoring has received broad attention by policy makers in advanced coutnries such as U.S. and Europe. Firms once offshored are relocating production back to the home country as production costs have significantly increased in emerging countries, and as they encounter a variety of difficulties such as low quality of products and low flexibility in production processes.
   The Korean government announced reshoring policies which provide reshoring firms with tax or subsidy incentives in December 2013. However, the policies appeared to be ineffective because only a very limited number of firms chose to reverse their previous offshoring decisions, leading to the concern that only a small number of firms are realizing the benefit of the reshoring policies. Therefore, this study aims to analyze the background of reshoring and effectiveness of reshoring policies from various angles. First of all, this study examines the definition of reshoring used in the literature and compares this with the concept of reshoring used in the media or policies. In addition, we infer the possibility of reshoring based on Korean firm data and develop a model to study the effectiveness of the reshoring policies. Lastly, we study reshoring trends and policies for Korea, U.S., Europe, and Taiwan to provide policy implications.
   First of all, this study examines the definition of reshoring broadly used in the literature, finding that it covers more patterns than those used in the media and policy. The act of reshoring, as perceived by the media and policy, only includes cases where firms move back to their home country by investing in new production facilities. Reshoring in academic literature, on the other hand, also includes cases in which production moves back to the home country through outsourcing increasing domestic production. Reshoring is motivated by an increase in the production cost in emerging countries, improvement of the product quality and proximity to the customers. In addition, it is encouraged by policies which aim to strengthen the manufacturing sector, create new jobs, and complement inward foreign direct investment. For example, the U.S. Europe, and Korea implement reshoring policies by providing a variety of tax exemption and subsidy measures for firms which reverse their previous offshoring decision.
   Next, we use data on the sourcing of Korean firms to measure the possibility of reshoring. The data presents that the portion of intermediate goods procured abroad decreases in 10 sectors among 24 sectors in recent years, implying that the sectors have relatively high probability of moving production facilities back to their home country. In particular, the reduction in foreign sourcing is pronounced in the manufacturing of other transportation equipment and manufacture of leather, luggage, and footwear. Also, most of the reshoring is incurred by moving their foreign outsourcing to domestic outsourcing. The relationship between sourcing patterns and productivity shows that the firms which procure intermediate goods from foreign affiliates or foreign in-sourcing have the highest productivity, implying that strong economic incentives are needed to reverse their offshoring decisions.
   Chapter 4 extends Grossman and Rossi-Hansberg (2008) and Wright (2014) to investigate firms’ offshoring and reshoring decisions and evaluate the impact of reshoring policies on employment and production. The firms choose offshoring when foreign production cost is less than domestic production cost. However, when they establish foreign affiliates, they may encounter unexpected costs from low quality of products or difficulties in management and so on, incurring additional costs related to foreign production and resulting in a reversal of their offshoring decision. In addition, if the government provides subsidies for reshoring, more firms are encouraged to move their production facilities back to their home country. On the other hand, as the reshoring policies lower the expected cost of offshoring, it also has the effect of encouraging the offshoring of firms. To summarize, reshoring policies expand offshoring as well as reshoring, and as such they do not guarantee additional job creation and an increase of production.
   Chapter 5 investigates reshoring trends and policies in Korea, U.S., Europe, and Taiwan. Korea implemented reshoring policies in 2013 to support firms which cut back foreign production and return to their home country by proving them with tax exemption and subsidy. As a result, 44 firms decide to reverse their foreign production as of Feb. 2018, mainly in industries of electronics and jewellery. Some papers conducted a survey targeting domestic reshoring firms and they show that reshoring policies are negatively assessed, and high labor cost, unavailability of skilled workers, troubles in closing production facilities abroad are pointed out as the difficulties associated with reshoring.
   Reshoring in the U.S. is reported in the “Reshoring Initiative Report,” which includes all types of reshoring introduced in Chapter 2. According to the report, there are about 700 cases of reshoring between 2010 and 2014. About 60% of firms came back from China as labor cost in China has rapidly risen in recent years. However, experts say that reshoring is not a main trend and does not substitute for offshoring. The U.S. government tries to attract domestic multinational firms by providing favorable conditions for investment through tax reduction, low energy cost, and construction of infrastructure.
   The EU encourages multinational firms to come back to their home country to achieve 20% of value added in the manufacturing sector until 2020. In particular, the reshoring policy is conducted in relation to the innovation strategy, such as Industry 4.0. Reshoring is most often observed in Sweden and Ireland, and is concentrated in high-tech sectors or the fashion industry to explore cutting-edge technology and high-skilled workers and to improve the proximity to the customers and response to rapidly changing trends. Also, the main reasons for reshoring in EU are low-quality of products and low flexibility in the production process. However, EU experts and policy makers still see that reshoring is a limited trend and a natural decision of the firms following offshoring.
   The Taiwanese government conducted a comprehensive survey for offshoring firms, asking whether they would be willing to return home, going on to provide subsidies for land and labor, and tax exemption for firms which were willing to come back to Taiwan. In particular, the government supports R&D operations to attract firms which possess advanced technology and materials. As a result, 255 firms returned to Taiwan between September 2006 and March 2009, followed by 85 more firms moving their production facilities to Taiwan in 2015 and 2016, achieving the target of the government. 
   Lastly, Chapter 6 discusses policy implications based on the data analysis, model development and case studies above. First of all, the goal of reshoring policies should be revised to improve industrial competitiveness rather than to create jobs. Specifically, the government needs to survey offshoring firms to understand their demand for reshoring and provide what they need to move production facilities back to their respective home countries. The government should apply a broad definition of reshoring to include reshoring from foreign outsourcing to domestic outsourcing because these forms of reshoring also contribute to an increase in production and employment. Also, the government should provide appropriate reshoring policies for high-tech sectors and the fashion industry in which reshoring is mostly observed, by providing pricing information or supply-chain information. Above all, it is important to provide favorable conditions for firms to increase their investment, which would have the effect of increasing both reshoring and inward foreign direct investment even without implementing reshoring policies. Lastly, differentiated incentive systems for different types of investment must be revised to prepare the basis for transparent investment policies.