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Offshoring, Automation, Low-Skilled Immigration, and Labor Market Polarization

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  • Federico S. Mandelman
  • Andrei Zlate

Abstract

We show that the observed polarization of employment toward the high- and low-skill occupations disappears when only native workers are considered. Instead, low-skilled immigration explains employment growth at the low tail of the skill distribution. Moreover, while employment rose, wages remained subdued in low-skill occupations. A data-disciplined structural model accounts for this evidence: Offshoring and automation negatively affect middle-skill occupations but enhance employment and wages for the high-skilled. Low-skill employment is sheltered from offshoring and automation, as it consists of manual, non-tradable services. However, low-skilled immigration depresses low-skill wages and encourages native workers to move into skilled occupations through training.

Suggested Citation

  • Federico S. Mandelman & Andrei Zlate, 2022. "Offshoring, Automation, Low-Skilled Immigration, and Labor Market Polarization," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 355-389, January.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:1:p:355-89
    DOI: 10.1257/mac.20180205
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    References listed on IDEAS

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    Cited by:

    1. Mann, Katja & Pozzoli, Dario, 2022. "Automation and Low-Skill Labor," IZA Discussion Papers 15791, Institute of Labor Economics (IZA).
    2. Wang, Linhui & Cao, Zhanglu & Dong, Zhiqing, 2023. "Are artificial intelligence dividends evenly distributed between profits and wages? Evidence from the private enterprise survey data in China," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 342-356.
    3. Javed, Mohsin, 2023. "Robots, Natives and Immigrants in US local labor markets," Labour Economics, Elsevier, vol. 85(C).
    4. Jin, Xin & Ma, Baojie & Zhang, Haifeng, 2023. "Impact of fast internet access on employment: Evidence from a broadband expansion in China," China Economic Review, Elsevier, vol. 81(C).
    5. Jiang, Zhe (Jasmine), 2023. "‘Multinational Firms’ Sourcing Decisions and Wage Inequality: A Dynamic Analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    6. Antea Barišić & Mahdi Ghodsi & Michael Landesmann, 2024. "Technological Push and Pull Factors of Bilateral Migration," wiiw Working Papers 242, The Vienna Institute for International Economic Studies, wiiw.
    7. Michal Burzynski, 2024. "Spatial and Occupational Mobility of Workers Due to Automation," LISER Working Paper Series 2024-04, Luxembourg Institute of Socio-Economic Research (LISER).
    8. Patel, Pankaj C., 2023. "Automation vulnerability, voting, and self-employment," Journal of Business Venturing Insights, Elsevier, vol. 19(C).

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    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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