Offshoring, low-skilled immigration, and labor market polarization

Arbeitspapier

During the last three decades, jobs in the middle of the skill distribution disappeared, and employment expanded for high- and low-skill occupations. Real wages did not follow the same pattern. Although earnings for the high-skill occupations increased robustly, wages for both low- and middleskill workers remained subdued. We attribute this outcome to the rise in offshoring and low-skilled immigration, and we develop a three-country stochastic growth model to rationalize this outcome. In the model, the increase in offshoring negatively affects the middle-skill occupations but benefits the high-skill ones, which in turn boosts aggregate productivity. As the income of high-skill occupations rises, so does the demand for services provided by low-skill workers. However, low-skill wages remain depressed as a result of the surge in unskilled immigration. Native workers react to immigration by upgrading the skill content of their labor tasks as they invest in training.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2014-28

Classification and Topics

• Classification: Wirtschaft ; Trade and Labor Market Interactions ; Open Economy Macroeconomics
• Subject: labor market polarization ; task upgrading ; offshoring ; labor migration ; heterogeneous agents ; international business cycles

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mandelman, Federico S. ; Zlate, Andrei
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/114486
• Last update: 10.03.2025, 11:41 AM CET